Western Midstream Partners, LP 10-K

Item 8. Financial Statements INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Management’s Assessment of Internal Control Over Financial Reporting 97 Western Midstream Partners, LP 98 Reports of Independent Registered Public Accounting Firm 98 Financial Statements 102 Consolidated Statements of Operations for the years ended December 31, 202 2 , 202 1 , and 20 20 102 Consolidated Balance Sheets as of December 31, 202 2 and 202 1 103 Consolidated Statements of Equity and Partners’ Capital for the years ended December 31, 202 2 , 202 1 , and 20 20 104 Consolidated Statements of Cash Flows for the years ended December 31, 202 2 , 202 1 , and 20 20 105 Western Midstream Operating, LP 106 Report of Independent Registered Public Accounting Firm 106 Financial Statements 108 Consolidated Statements of Operations for the years ended December 31, 202 2 , 202 1 , and 20 20 108 Consolidated Balance Sheets as of December 31, 202 2 and 202 1 109 Consolidated Statements of Equity and Partners’ Capital for the years ended December 31, 202 2 , 202 1 , and 20 20 110 Consolidated Statements of Cash Flows for the years ended December 31, 202 2 , 202 1 , and 20 20 111 Notes to Consolidated Financial Statements 112 Note 1. Summary of Significant Accounting Policies and Basis of Presentation 112 Note 2. Revenue from Contracts with Customers 121 Note 3. Acquisitions and Divestitures 123 Note 4. Partnership Distributions 123 Note 5. Equity and Partners’ Capital 125 Note 6. Related-Party Transactions 126 Note 7. Equity Investments 131 Note 8. Income Taxes 133 Note 9. Property, Plant, and Equipment 135 Note 10. Goodwill and Other Intangibles 136 Note 11. Selected Components of Working Capital 138 Note 12. Asset Retirement Obligations 139 Note 13. Debt and Interest Expense 140 Note 14. Leases 143 Note 15. Equity-Based Compensation 145 Note 16. Commitments and Contingencies 147 96 Table of Contents MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Partnership’s and WES Operating’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Partnership’s and WES Operating’s internal control over financial reporting as of December 31, 2022. This assessment was based on criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment using the COSO criteria, we concluded the Partnership’s and WES Operating’s internal control over financial reporting was effective as of December 31, 2022. KPMG LLP, the Partnership’s independent registered public accounting firm, has issued an attestation report on the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2022. WESTERN MIDSTREAM PARTNERS, LP /s/ Michael P. Ure Michael P. Ure President and Chief Executive Officer Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) /s/ Kristen S. Shults Kristen S. Shults Senior Vice President and Chief Financial Officer Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) WESTERN MIDSTREAM OPERATING, LP /s/ Michael P. Ure Michael P. Ure President and Chief Executive Officer Western Midstream Operating GP, LLC (as general partner of Western Midstream Operating, LP) /s/ Kristen S. Shults Kristen S. Shults Senior Vice President and Chief Financial Officer Western Midstream Operating GP, LLC (as general partner of Western Midstream Operating, LP) February 22, 2023 97 Table of Contents WESTERN MIDSTREAM PARTNERS, LP Report of Independent Registered Public Accounting Firm To the Board of Directors of Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders Western Midstream Partners, LP: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Western Midstream Partners, LP and subsidiaries (the Partnership) as of December 31, 2022 and 2021, the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2023 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of potential impairment indicators for long-lived assets As discussed in Notes 1, 9, and 10 to the consolidated financial statements, the Partnership assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets (collectively, long-lived assets) for impairment when events or changes in circumstances indicate their carrying values may not 98 Table of Contents be recoverable. Impairments exist when the carrying value of a long-lived asset exceeds the total estimated undiscounted net cash flows from the future use and eventual disposition of the asset. We identified the evaluation of potential impairment indicators for long-lived assets as a critical audit matter. Evaluating the Partnership’s judgments in determining whether events or changes in circumstances indicate carrying values may not be recoverable required a higher degree of subjective auditor judgment. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Partnership’s long-lived asset impairment process. This included controls related to the identification and assessment of qualitative impairment indicators of long-lived assets and the underlying quantitative data used to perform the analysis. We assessed the Partnership’s identification of long-lived assets for potential impairment indicators by evaluating the Partnership’s assessment of the factors considered. Specifically, we: • evaluated overall macro-economic conditions and commodity price trends; • analyzed the financial results for long-lived assets to identify significant degradations in the related cash flows; • compared the remaining useful lives of the long-lived assets to the period of time required to recover the carrying value of the assets based on current cash flows; and • examined external information on certain of the Partnership’s customers’ drilling plans and performed sensitivity analysis to determine the impact significant declines in volumes could have on the recoverability of the related long-lived assets. /s/ KPMG LLP We have served as the Partnership’s auditor since 2012. Houston, Texas February 22, 2023 99 Table of Contents WESTERN MIDSTREAM PARTNERS, LP Report of Independent Registered Public Accounting Firm To the Board of Directors of Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP) and Unitholders Western Midstream Partners, LP: Opinion on Internal Control Over Financial Reporting We have audited Western Midstream Partners, LP and subsidiaries’ (the Partnership) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Partnership as of December 31, 2022 and 2021, the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2023 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 100 Table of Contents Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Houston, Texas February 22, 2023 101 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, thousands except per-unit amounts 2022 2021 2020 Revenues and other Service revenues – fee based $ 2,602,053 $ 2,462,835 $ 2,584,323 Service revenues – product based 249,692 122,584 48,369 Product sales 399,023 290,947 138,559 Other 953 789 1,341 Total revenues and other (1) 3,251,721 2,877,155 2,772,592 Equity income, net – related parties 183,483 204,645 226,750 Operating expenses Cost of product 420,900 322,285 188,088 Operation and maintenance 654,566 581,300 580,874 General and administrative 194,017 195,549 155,769 Property and other taxes 78,559 64,267 68,340 Depreciation and amortization 582,365 551,629 491,086 Long - lived asset and other impairments (2) 20,585 30,543 203,889 Goodwill impairment — — 441,017 Total operating expenses (3) 1,950,992 1,745,573 2,129,063 Gain (loss) on divestiture and other, net 103,676 44 8,634 Operating income (loss) 1,587,888 1,336,271 878,913 Interest income – Anadarko note receivable — — 11,736 Interest expense ( 333,939 ) ( 376,512 ) ( 380,058 ) Gain (loss) on early extinguishment of debt 91 ( 24,944 ) 11,234 Other income (expense), net 1,603 ( 623 ) 1,025 Income (loss) before income taxes 1,255,643 934,192 522,850 Income tax expense (benefit) 4,187 ( 9,807 ) 5,998 Net income (loss) 1,251,456 943,999 516,852 Net income (loss) attributable to noncontrolling interests 34,353 27,707 ( 10,160 ) Net income (loss) attributable to Western Midstream Partners, LP $ 1,217,103 $ 916,292 $ 527,012 Limited partners’ interest in net income (loss): Net income (loss) attributable to Western Midstream Partners, LP $ 1,217,103 $ 916,292 $ 527,012 General partner interest in net (income) loss ( 27,541 ) ( 19,815 ) ( 11,104 ) Limited partners’ interest in net income (loss) (4) 1,189,562 896,477 515,908 Net income (loss) per common unit – basic (4) $ 3.01 $ 2.18 $ 1.18 Net income (loss) per common unit – diluted (4) $ 3.00 $ 2.18 $ 1.18 Weighted - average common units outstanding – basic (4) 394,951 411,309 435,554 Weighted - average common units outstanding – diluted (4) 396,236 412,022 435,624 _________________________________________________________________________________________ (1) Total revenues and other includes related - party amounts of $ 1.8 billion, $ 1.6 billion, and $ 1.8 billion for the years ended December 31, 2022, 2021, and 2020, respectively. See Note 6 . (2) See Note 7 and Note 9 . (3) Total operating expenses includes related - party amounts of $( 18.0 ) million, $ 86.2 million, and $ 182.7 million for the years ended December 31, 2022, 2021, and 2020, respectively. See Note 6 . (4) See Note 5. See accompanying Notes to Consolidated Financial Statements. 102 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED BALANCE SHEETS December 31, thousands except number of units 2022 2021 ASSETS Current assets Cash and cash equivalents $ 286,656 $ 201,999 Accounts receivable, net 554,263 436,513 Other current assets 59,506 46,252 Total current assets 900,425 684,764 Property, plant, and equipment Cost 13,365,593 12,846,078 Less accumulated depreciation 4,823,993 4,333,171 Net property, plant, and equipment 8,541,600 8,512,907 Goodwill 4,783 4,783 Other intangible assets 713,075 744,742 Equity investments 944,696 1,167,187 Other assets (1) 167,049 158,696 Total assets (2) $ 11,271,628 $ 11,273,079 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 360,562 $ 326,061 Short - term debt 215,780 505,932 Accrued ad valorem taxes 72,875 44,955 Accrued liabilities 254,640 263,249 Total current liabilities 903,857 1,140,197 Long-term liabilities Long - term debt 6,569,582 6,400,616 Deferred income taxes 14,424 12,425 Asset retirement obligations 290,021 298,275 Other liabilities 385,629 325,806 Total long - term liabilities 7,259,656 7,037,122 Total liabilities (3) 8,163,513 8,177,319 Equity and partners’ capital Common units ( 384,070,984 and 402,993,919 units issued and outstanding at December 31, 2022 and 2021, respectively) 2,969,604 2,966,955 General partner units ( 9,060,641 units issued and outstanding at December 31, 2022 and 2021) 2,105 ( 8,882 ) Total partners’ capital 2,971,709 2,958,073 Noncontrolling interests 136,406 137,687 Total equity and partners’ capital 3,108,115 3,095,760 Total liabilities, equity, and partners’ capital $ 11,271,628 $ 11,273,079 ________________________________________________________________________________________ (1) Other assets includes $ 6.5 million and $ 9.8 million of NGLs line - fill inventory as of December 31, 2022 and 2021, respectively. Other assets also includes $ 60.4 million and $ 56.2 million of materials and supplies inventory as of December 31, 2022 and 2021, respectively. (2) Total assets includes related - party amounts of $ 1.3 billion and $ 1.4 billion as of December 31, 2022 and 2021, respectively, which includes related - party Accounts receivable, net of $ 313.9 million and $ 180.2 million as of December 31, 2022 and 2021, respectively. See Note 6 . (3) Total liabilities includes related - party amounts of $ 312.3 million and $ 270.5 million as of December 31, 2022 and 2021, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 103 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL Partners’ Capital thousands Common Units General Partner Units Noncontrolling Interests Total Balance at December 31, 2019 $ 3,209,947 $ ( 14,224 ) $ 149,570 $ 3,345,293 Net income (loss) 515,908 11,104 ( 10,160 ) 516,852 Distributions to Chipeta noncontrolling interest owner — — ( 8,644 ) ( 8,644 ) Distributions to noncontrolling interest owner of WES Operating — — ( 15,434 ) ( 15,434 ) Distributions to Partnership unitholders ( 681,746 ) ( 14,088 ) — ( 695,834 ) Unit exchange with Occidental (1) ( 256,640 ) — ( 5,238 ) ( 261,878 ) Unit repurchases (2) ( 32,535 ) — — ( 32,535 ) Acquisitions from related parties ( 3,987 ) — 3,987 — Contributions of equity-based compensation from Occidental 14,604 — — 14,604 Equity-based compensation expense 7,857 — — 7,857 Net contributions from (distributions to) related parties (3) 4,466 — 20,000 24,466 Other 465 — — 465 Balance at December 31, 2020 $ 2,778,339 $ ( 17,208 ) $ 134,081 $ 2,895,212 Net income (loss) 896,477 19,815 27,707 943,999 Distributions to Chipeta noncontrolling interest owner — — ( 9,117 ) ( 9,117 ) Distributions to noncontrolling interest owner of WES Operating — — ( 14,984 ) ( 14,984 ) Distributions to Partnership unitholders ( 522,269 ) ( 11,489 ) — ( 533,758 ) Unit repurchases (2) ( 217,465 ) — — ( 217,465 ) Contributions of equity - based compensation from Occidental 10,087 — — 10,087 Equity - based compensation expense 17,589 — — 17,589 Net contributions from (distributions to) related parties 8,533 — — 8,533 Other ( 4,336 ) — — ( 4,336 ) Balance at December 31, 2021 $ 2,966,955 $ ( 8,882 ) $ 137,687 $ 3,095,760 Net income (loss) 1,189,562 27,541 34,353 1,251,456 Distributions to Chipeta noncontrolling interest owner — — ( 10,736 ) ( 10,736 ) Distributions to noncontrolling interest owner of WES Operating — — ( 24,898 ) ( 24,898 ) Distributions to Partnership unitholders ( 719,201 ) ( 16,554 ) — ( 735,755 ) Unit repurchases (2) ( 487,590 ) — — ( 487,590 ) Contributions of equity - based compensation from Occidental 2,277 — — 2,277 Equity - based compensation expense 25,506 — — 25,506 Net contributions from (distributions to) related parties 1,423 — — 1,423 Other ( 9,328 ) — — ( 9,328 ) Balance at December 31, 2022 $ 2,969,604 $ 2,105 $ 136,406 $ 3,108,115 _________________________________________________________________________________________ (1) See Note 6 . (2) See Note 5 . (3) Includes a one-time cash contribution Occidental made to WES Operating in January 2020 for anticipated transition costs required to establish stand-alone human resources and information technology functions. See accompanying Notes to Consolidated Financial Statements. 104 Table of Contents WESTERN MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, thousands 2022 2021 2020 Cash flows from operating activities Net income (loss) $ 1,251,456 $ 943,999 $ 516,852 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 582,365 551,629 491,086 Long - lived asset and other impairments 20,585 30,543 203,889 Goodwill impairment — — 441,017 Non - cash equity - based compensation expense 27,783 27,676 22,462 Deferred income taxes 1,999 ( 9,770 ) 3,296 Accretion and amortization of long - term obligations, net 7,142 7,635 8,654 Equity income, net – related parties ( 183,483 ) ( 204,645 ) ( 226,750 ) Distributions from equity - investment earnings – related parties 186,153 213,516 246,637 (Gain) loss on divestiture and other, net ( 103,676 ) ( 44 ) ( 8,634 ) (Gain) loss on early extinguishment of debt ( 91 ) 24,944 ( 11,234 ) Cash paid to settle interest-rate swaps — — ( 25,621 ) Other 510 260 193 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 116,296 ) 16,366 ( 193,688 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net ( 7,812 ) 114,887 144,437 Change in other items, net 34,791 49,856 24,822 Net cash provided by operating activities 1,701,426 1,766,852 1,637,418 Cash flows from investing activities Capital expenditures (1) ( 487,228 ) ( 313,674 ) ( 423,602 ) Acquisitions from third parties ( 40,127 ) — — Contributions to equity investments – related parties ( 9,632 ) ( 4,435 ) ( 19,388 ) Distributions from equity investments in excess of cumulative earnings – related parties 63,897 41,385 32,160 Proceeds from the sale of assets to related parties 200 — — Proceeds from the sale of assets to third parties 264,121 8,102 20,333 (Increase) decrease in materials and supplies inventory and other ( 9,468 ) 11,084 ( 57,757 ) Net cash used in investing activities ( 218,237 ) ( 257,538 ) ( 448,254 ) Cash flows from financing activities Borrowings, net of debt issuance costs 1,389,010 480,000 3,681,173 Repayments of debt ( 1,518,548 ) ( 1,432,966 ) ( 3,803,888 ) Increase (decrease) in outstanding checks 2,206 ( 21,631 ) 20,699 Distributions to Partnership unitholders (1) ( 735,755 ) ( 533,758 ) ( 695,834 ) Distributions to Chipeta noncontrolling interest owner ( 10,736 ) ( 9,117 ) ( 8,644 ) Distributions to noncontrolling interest owner of WES Operating ( 24,898 ) ( 14,984 ) ( 15,434 ) Net contributions from (distributions to) related parties 1,423 8,533 24,466 Unit repurchases (1) ( 487,590 ) ( 217,465 ) ( 32,535 ) Other (1) ( 13,644 ) ( 10,849 ) ( 14,207 ) Net cash provided by (used in) financing activities ( 1,398,532 ) ( 1,752,237 ) ( 844,204 ) Net increase (decrease) in cash and cash equivalents 84,657 ( 242,923 ) 344,960 Cash and cash equivalents at beginning of period 201,999 444,922 99,962 Cash and cash equivalents at end of period $ 286,656 $ 201,999 $ 444,922 Supplemental disclosures Non-cash unit exchange with Occidental (1) $ — $ — $ ( 261,878 ) Interest paid, net of capitalized interest 355,363 375,007 349,913 Income taxes paid (reimbursements received) 912 938 ( 384 ) Accrued capital expenditures 82,353 35,240 25,126 _________________________________________________________________________________________ (1) Includes related-party amounts. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 105 Table of Contents WESTERN MIDSTREAM OPERATING, LP Report of Independent Registered Public Accounting Firm To the Board of Directors of Western Midstream Holdings, LLC (as general partner of Western Midstream Partners, LP): Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Western Midstream Operating, LP and subsidiaries (WES Operating) as of December 31, 2022 and 2021, the related consolidated statements of operations, equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of WES Operating as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of WES Operating’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to WES Operating in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. WES Operating is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of WES Operating’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of potential impairment indicators for long-lived assets As discussed in Notes 1, 9, and 10 to the consolidated financial statements, WES Operating assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets (collectively, long-lived assets) for impairment when events or changes in circumstances indicate their carrying 106 Table of Contents values may not be recoverable. Impairments exist when the carrying value of a long-lived asset exceeds the total estimated undiscounted net cash flows from the future use and eventual disposition of the asset. We identified the evaluation of potential impairment indicators for long-lived assets as a critical audit matter. Evaluating WES Operating’s judgments in determining whether events or changes in circumstances indicate carrying values may not be recoverable required a higher degree of subjective auditor judgment. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to WES Operating’s long-lived asset impairment process. This included controls related to the identification and assessment of qualitative impairment indicators of long-lived assets and the underlying quantitative data used to perform the analysis. We assessed WES Operating’s identification of long-lived assets for potential impairment indicators by evaluating WES Operating’s assessment of the factors considered. Specifically, we: • evaluated overall macro-economic conditions and commodity price trends; • analyzed the financial results for long-lived assets to identify significant degradations in the related cash flows; • compared the remaining useful lives of the long-lived assets to the period of time required to recover the carrying value of the assets based on current cash flows; and • examined external information on certain of WES Operating’s customers’ drilling plans and performed sensitivity analysis to determine the impact significant declines in volumes could have on the recoverability of the related long-lived assets. /s/ KPMG LLP We have served as WES Operating’s auditor since 2007. Houston, Texas February 22, 2023 107 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, thousands 2022 2021 2020 Revenues and other Service revenues – fee based $ 2,602,053 $ 2,462,835 $ 2,584,323 Service revenues – product based 249,692 122,584 48,369 Product sales 399,023 290,947 138,559 Other 953 789 1,341 Total revenues and other (1) 3,251,721 2,877,155 2,772,592 Equity income, net – related parties 183,483 204,645 226,750 Operating expenses Cost of product 420,900 322,285 188,088 Operation and maintenance 654,566 581,300 580,874 General and administrative 191,361 192,617 152,217 Property and other taxes 78,559 64,267 68,340 Depreciation and amortization 582,365 551,629 491,086 Long - lived asset and other impairments (2) 20,585 30,543 203,889 Goodwill impairment — — 441,017 Total operating expenses (3) 1,948,336 1,742,641 2,125,511 Gain (loss) on divestiture and other, net 103,676 44 8,634 Operating income (loss) 1,590,544 1,339,203 882,465 Interest income – Anadarko note receivable — — 11,736 Interest expense ( 333,939 ) ( 376,512 ) ( 380,058 ) Gain (loss) on early extinguishment of debt 91 ( 24,944 ) 11,234 Other income (expense), net 1,558 ( 634 ) 1,008 Income (loss) before income taxes 1,258,254 937,113 526,385 Income tax expense (benefit) 4,180 ( 9,816 ) 5,998 Net income (loss) 1,254,074 946,929 520,387 Net income (loss) attributable to noncontrolling interest 9,454 8,942 ( 20,990 ) Net income (loss) attributable to Western Midstream Operating, LP $ 1,244,620 $ 937,987 $ 541,377 ________________________________________________________________________________________ (1) Total revenues and other includes related - party amounts of $ 1.8 billion, $ 1.6 billion, and $ 1.8 billion for the years ended December 31, 2022, 2021, and 2020, respectively. See Note 6 . (2) See Note 7 and Note 9 . (3) Total operating expenses includes related - party amounts of $( 15.0 ) million, $ 89.0 million, and $ 184.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 108 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED BALANCE SHEETS December 31, thousands except number of units 2022 2021 ASSETS Current assets Cash and cash equivalents $ 286,101 $ 195,598 Accounts receivable, net 554,263 436,513 Other current assets 57,291 44,421 Total current assets 897,655 676,532 Property, plant, and equipment Cost 13,365,593 12,846,078 Less accumulated depreciation 4,823,993 4,333,171 Net property, plant, and equipment 8,541,600 8,512,907 Goodwill 4,783 4,783 Other intangible assets 713,075 744,742 Equity investments 944,696 1,167,187 Other assets (1) 166,450 158,696 Total assets (2) $ 11,268,259 $ 11,264,847 LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL Current liabilities Accounts and imbalance payables $ 404,468 $ 374,443 Short - term debt 215,780 505,932 Accrued ad valorem taxes 72,875 44,955 Accrued liabilities 197,289 210,693 Total current liabilities 890,412 1,136,023 Long-term liabilities Long - term debt 6,569,582 6,400,616 Deferred income taxes 14,424 12,425 Asset retirement obligations 290,021 298,275 Other liabilities 383,713 324,842 Total long - term liabilities 7,257,740 7,036,158 Total liabilities (3) 8,148,152 8,172,181 Equity and partners’ capital Common units ( 318,675,578 units issued and outstanding at December 31, 2022 and 2021) 3,092,012 3,063,289 Total partners’ capital 3,092,012 3,063,289 Noncontrolling interest 28,095 29,377 Total equity and partners’ capital 3,120,107 3,092,666 Total liabilities, equity, and partners’ capital $ 11,268,259 $ 11,264,847 _________________________________________________________________________________________ (1) Other assets includes $ 6.5 million and $ 9.8 million of NGLs line - fill inventory as of December 31, 2022 and 2021, respectively. Other assets also includes $ 60.4 million and $ 56.2 million of materials and supplies inventory as of December 31, 2022 and 2021, respectively. (2) Total assets includes related - party amounts of $ 1.3 billion and $ 1.4 billion as of December 31, 2022 and 2021, respectively, which includes related - party Accounts receivable, net of $ 313.9 million and $ 180.2 million as of December 31, 2022 and 2021, respectively. See Note 6 . (3) Total liabilities includes related - party amounts of $ 356.0 million and $ 318.7 million as of December 31, 2022 and 2021, respectively. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 109 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL thousands Common Units Noncontrolling Interest Total Balance at December 31, 2019 $ 3,286,620 $ 55,199 3,341,819 Net income (loss) 541,377 ( 20,990 ) 520,387 Distributions to Chipeta noncontrolling interest owner — ( 8,644 ) ( 8,644 ) Distributions to WES Operating unitholders ( 771,546 ) — ( 771,546 ) Acquisitions from related parties ( 3,987 ) 3,987 — Contributions of equity-based compensation from Occidental 14,604 — 14,604 Unit exchange with Occidental (1) ( 261,878 ) — ( 261,878 ) Net contributions from (distributions to) related parties (2) 24,466 — 24,466 Other 1,543 — 1,543 Balance at December 31, 2020 $ 2,831,199 $ 29,552 $ 2,860,751 Net income (loss) 937,987 8,942 946,929 Distributions to Chipeta noncontrolling interest owner — ( 9,117 ) ( 9,117 ) Distributions to WES Operating unitholders ( 749,018 ) — ( 749,018 ) Contributions of equity - based compensation from Occidental 10,087 — 10,087 Contributions of equity - based compensation from WES 24,501 — 24,501 Net contributions from (distributions to) related parties 8,533 — 8,533 Balance at December 31, 2021 $ 3,063,289 $ 29,377 $ 3,092,666 Net income (loss) 1,244,620 9,454 1,254,074 Distributions to Chipeta noncontrolling interest owner — ( 10,736 ) ( 10,736 ) Distributions to WES Operating unitholders ( 1,244,533 ) — ( 1,244,533 ) Contributions of equity - based compensation from Occidental 2,277 — 2,277 Contributions of equity - based compensation from WES 24,936 — 24,936 Net contributions from (distributions to) related parties 1,423 — 1,423 Balance at December 31, 2022 $ 3,092,012 $ 28,095 $ 3,120,107 _____________________________________________________________________________________ (1) See Note 5 . (2) Includes a one-time cash contribution Occidental made to WES Operating in January 2020 for anticipated transition costs required to establish stand-alone human resources and information technology functions. See accompanying Notes to Consolidated Financial Statements. 110 Table of Contents WESTERN MIDSTREAM OPERATING, LP CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, thousands 2022 2021 2020 Cash flows from operating activities Net income (loss) $ 1,254,074 $ 946,929 $ 520,387 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 582,365 551,629 491,086 Long - lived asset and other impairments 20,585 30,543 203,889 Goodwill impairment — — 441,017 Non - cash equity - based compensation expense 27,213 34,588 14,604 Deferred income taxes 1,999 ( 9,770 ) 3,296 Accretion and amortization of long - term obligations, net 7,142 7,635 8,654 Equity income, net – related parties ( 183,483 ) ( 204,645 ) ( 226,750 ) Distributions from equity - investment earnings – related parties 186,153 213,516 246,637 (Gain) loss on divestiture and other, net ( 103,676 ) ( 44 ) ( 8,634 ) (Gain) loss on early extinguishment of debt ( 91 ) 24,944 ( 11,234 ) Cash paid to settle interest-rate swaps — — ( 25,621 ) Other 510 260 193 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net ( 116,296 ) ( 28,965 ) ( 147,041 ) Increase (decrease) in accounts and imbalance payables and accrued liabilities, net ( 17,189 ) 150,055 105,352 Change in other items, net 34,827 48,704 24,816 Net cash provided by operating activities 1,694,133 1,765,379 1,640,651 Cash flows from investing activities Capital expenditures (1) ( 487,228 ) ( 313,674 ) ( 423,602 ) Acquisitions from third parties ( 40,127 ) — — Contributions to equity investments – related parties ( 9,632 ) ( 4,435 ) ( 19,388 ) Distributions from equity investments in excess of cumulative earnings – related parties 63,897 41,385 32,160 Proceeds from the sale of assets to related parties 200 — — Proceeds from the sale of assets to third parties 264,121 8,102 20,333 (Increase) decrease in materials and supplies inventory and other ( 9,468 ) 11,084 ( 57,757 ) Net cash used in investing activities ( 218,237 ) ( 257,538 ) ( 448,254 ) Cash flows from financing activities Borrowings, net of debt issuance costs 1,389,010 480,000 3,681,173 Repayments of debt ( 1,518,548 ) ( 1,432,966 ) ( 3,803,888 ) Increase (decrease) in outstanding checks 2,309 ( 21,699 ) 20,664 Distributions to WES Operating unitholders (1) ( 1,244,533 ) ( 749,018 ) ( 771,546 ) Distributions to Chipeta noncontrolling interest owner ( 10,736 ) ( 9,117 ) ( 8,644 ) Net contributions from (distributions to) related parties 1,423 8,533 24,466 Other ( 4,318 ) ( 6,513 ) ( 14,207 ) Net cash provided by (used in) financing activities ( 1,385,393 ) ( 1,730,780 ) ( 871,982 ) Net increase (decrease) in cash and cash equivalents 90,503 ( 222,939 ) 320,415 Cash and cash equivalents at beginning of period 195,598 418,537 98,122 Cash and cash equivalents at end of period $ 286,101 $ 195,598 $ 418,537 Supplemental disclosures Non-cash unit exchange with Occidental (1) $ — $ — $ ( 261,878 ) Interest paid, net of capitalized interest 355,363 375,007 349,913 Income taxes paid (reimbursements received) 912 938 ( 384 ) Accrued capital expenditures 82,353 35,240 25,126 ________________________________________________________________________________________ (1) Includes related-party amounts. See Note 6 . See accompanying Notes to Consolidated Financial Statements. 111 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 December 31, 2022, the Partnership’s assets and investments consisted of the following: Wholly Owned and Operated Operated Interests Non-Operated Interests Equity Interests Gathering systems (1) 17 2 3 1 Treating facilities 37 3 — — Natural - gas processing plants/trains 25 3 — 3 NGLs pipelines 2 — — 5 Natural - gas pipelines 6 — — 1 Crude - oil pipelines 3 1 — 3 _________________________________________________________________________________________ (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. 112 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 % Panola Pipeline Company, LLC (“Panola”) 15.00 % White Cliffs Pipeline, LLC (“White Cliffs”) 10.00 % _________________________________________________________________________________________ (1) The 25 % third - party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below. (2) The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets. (3) Investments in non - controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity - investment throughput” refers to the Partnership’s share of average throughput for these investments. 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. 113 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION 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 December 31, 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 % limited partner interest in WES Operating owned by an Occidental subsidiary. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25 % third - party interest in Chipeta. See Note 5. Fair value. The fair-value-measurement standard defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard characterizes inputs used in determining fair value according to a hierarchy that prioritizes those inputs based on the degree to which the inputs are observable. The three input levels of the fair-value hierarchy are as follows: Level 1 – Inputs represent unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs). Level 3 – Inputs that are not observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability (for example, an estimate of future cash flows used in management’s internally developed present value of future cash flows model that underlies the fair value measurement). 114 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION In determining fair value, management uses observable market data when available, or models that incorporate observable market data. When a fair value measurement is required and there is not a market-observable price for the asset or liability or a market-observable price for a similar asset or liability, the cost, income, or market approach is used, depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset-replacement cost. The income approach uses management’s best assumptions regarding expectations of projected cash flows and discounts the expected cash flows using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment because results are based on expected future events or conditions, such as contractual rates, estimates of future throughput, capital and operating costs and the timing thereof, economic and regulatory climates, and other factors. The market approach uses management’s best assumptions regarding expectations of projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and an assumed multiple of that EBITDA that a willing buyer would pay to acquire an asset. Management’s estimates of future net cash flows and EBITDA are inherently imprecise because they reflect management’s expectation of future conditions that are often outside of management’s control. However, the assumptions used reflect a market participant’s view of long-term revenues, costs, and other factors, and are consistent with assumptions used in the Partnership’s business plans and investment decisions. Management uses relevant observable inputs available for the valuation technique employed to estimate fair value. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based on the lowest level of input that is significant to the fair-value measurement. Non-financial assets and liabilities initially measured at fair value include certain assets and liabilities acquired in a third-party business combination, assets and liabilities exchanged in non-monetary transactions, goodwill and other intangibles, and the initial measurement of asset retirement obligations. Impairment analyses for long-lived assets, goodwill, and equity investments and the initial recognition of asset retirement obligations use Level-3 inputs. The fair value of debt reflects any premium or discount for the difference between the stated interest rate and the quarter-end market interest rate and is based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments. See Note 13 . The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable reported on the consolidated balance sheets approximate fair value due to the short-term nature of these items. Cash equivalents. All highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents. Credit losses. Accounts receivable represent contractual rights for services performed, with, on average, 30-day payment terms from the invoice date. Contract assets primarily relate to revenue accrued but not yet billed under cost-of-service contracts and accrued deficiency fees. Exposure to credit losses is analyzed within collective pools for all of our customers and, if necessary, individual customers may be analyzed separately if their credit quality becomes a concern. The Partnership monitors credit exposure to all customers to ensure exposures are within established credit limits. As of December 31, 2022, there are no negative indications regarding the collectability of significant receivables and the Partnership will continue to monitor the credit quality of its customer base and assess collectability of these assets as appropriate. The allowance for expected credit losses was immaterial at December 31, 2022 and 2021. Imbalances. The consolidated balance sheets include imbalance receivables and payables resulting from differences in volumes received into the Partnership’s systems and volumes delivered by the Partnership to customers. Volumes owed to or by the Partnership that are subject to monthly cash settlement are valued according to the terms of the contract as of the balance sheet dates and reflect market index prices. Other volumes owed to or by the Partnership are valued at the Partnership’s weighted-average cost as of the balance sheet dates and are settled in-kind. As of December 31, 2022, imbalance receivables and payables were $ 32.7 million and $ 32.5 million, respectively. As of December 31, 2021, imbalance receivables and payables were $ 25.3 million and $ 16.6 million, respectively. Net changes in imbalance receivables and payables are reported in Cost of product in the consolidated statements of operations. 115 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Inventory. The cost of NGLs inventory is determined by the weighted-average cost method on a location-by-location basis. Inventory is stated at the lower of weighted-average cost or net realizable value. NGLs inventory is reported in Other current assets and NGLs line-fill inventory is reported in Other assets on the consolidated balance sheets. Materials and supplies inventory is valued at weighted-average cost, reviewed periodically for obsolescence, and assessed for impairment together with any associated property, plant, and equipment and other intangible assets. Materials and supplies inventory is reported in Other assets on the consolidated balance sheets. Property, plant, and equipment and other intangible assets. Property, plant, and equipment and other intangible assets are stated at historical cost less accumulated depreciation or amortization, or fair value if impaired. Prior long-lived asset acquisitions from Anadarko were transfers of net assets between entities under common control; therefore, the assets acquired were initially recorded at Anadarko’s historic carrying value. The difference between the carrying value of net assets acquired from Anadarko and the consideration paid has been recorded as an adjustment to partners’ capital. Assets acquired in a business combination or non-monetary exchange with a third party are initially recorded at fair value. All construction-related direct labor and material costs are capitalized. The cost of renewals and betterments that extend the useful life of property, plant, and equipment is also capitalized. The cost of repairs, replacements, and major maintenance projects that do not extend the useful life or increase the expected output of property, plant, and equipment is expensed as incurred. Depreciation is computed using the straight-line method based on estimated useful lives and salvage values of assets. Subsequent events could cause a change in estimates of remaining useful lives or salvage value, thereby impacting future depreciation amounts. Uncertainties that may impact these estimates include, but are not limited to, changes in laws and regulations relating to environmental matters, including air and water quality, restoration and abandonment requirements, economic conditions, and supply and demand in the area. Management assesses property, plant, and equipment together with any associated materials and supplies inventory and intangible assets, as described in Note 10 , for impairment when events or changes in circumstances indicate their carrying values may not be recoverable. Impairments exist when the carrying value of a long-lived asset exceeds the total estimated undiscounted net cash flows from the future use and eventual disposition of the asset. When alternative courses of action for future use of a long-lived asset are under consideration, estimates of future undiscounted net cash flows incorporate the possible outcomes and probabilities of their occurrence. If an impairment exists, an impairment loss is measured as the excess of the asset’s carrying value over its estimated fair value, such that the asset’s carrying value is adjusted down to its estimated fair value with an offsetting charge to Long-lived asset and other impairments. Refer to Note 9 for a description of impairments recorded during the years ended December 31, 2022, 2021, and 2020. Capitalized interest. Interest is capitalized as part of the historical cost of constructing assets that are in progress. Capitalized interest is determined by multiplying the Partnership’s weighted-average borrowing cost on debt by the average amount of assets under construction. Cumulative capitalized interest accrued during the year is expensed through depreciation or impairment. 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. 116 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Goodwill. Goodwill is recorded when the purchase price of a business acquired exceeds the fair market value of the tangible and separately measurable intangible net assets. In addition, goodwill represents the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko. The Partnership had allocated goodwill on its two reporting units: (i) gathering and processing and (ii) transportation. Goodwill is evaluated for impairment at the reporting unit level annually, as of October 1, or more often as facts and circumstances warrant. An initial qualitative assessment is performed to determine the likelihood of whether goodwill is impaired. If management concludes, based on qualitative factors, that it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then no goodwill impairment is recorded and further testing is not necessary. If an assessment of qualitative factors does not result in management’s determination that the fair value of the reporting unit more likely than not exceeds its carrying value, then a quantitative assessment must be performed. If the quantitative assessment indicates that the carrying value of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment is recorded for the amount by which the reporting unit’s carrying value exceeds its fair value through a charge to Goodwill impairment. The Partnership recognized a goodwill impairment of $ 441.0 million during the first quarter of 2020, which reduced the carrying value of goodwill to zero for the gathering and processing reporting unit. See Note 10 . Asset retirement obligations. When tangible long-lived assets are acquired or constructed, the initial estimated asset retirement obligation liability is recognized at fair value, measured using discounted expected future cash outflows of the settlement obligation, with an associated increase in property, plant, and equipment. Over time, the discounted liability is adjusted up to its expected settlement value through accretion expense, which is reported within Depreciation and amortization in the consolidated statements of operations. Estimated asset retirement costs typically extend many years into the future, and estimation requires significant judgment. Subsequent to the initial recognition, the liability is adjusted for any changes in the expected value of the retirement obligation (with a corresponding adjustment to property, plant, and equipment, or depreciation expense if the asset is fully depreciated) until the obligation is settled. Revisions in estimated asset retirement obligations may result from changes in estimated asset retirement costs, inflation rates, discount rates, and the estimated timing of settlement. See Note 12 . Environmental expenditures. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local laws and regulations. Losses associated with environmental obligations are accrued when the necessity for environmental remediation or other potential environmental liabilities becomes probable and the costs can be reasonably estimated, with the exception of environmental obligations acquired in a business combination, which are recorded at fair value at the time of acquisition. Accruals for estimated losses from environmental-remediation obligations are recognized no later than at the time of the completion of the remediation feasibility study or when the evaluation of response options is complete. These accruals are adjusted as additional information becomes available or as circumstances change. Costs of future expenditures for environmental-remediation obligations are not discounted to their present value. See Note 16. Revenue and cost of product. The Partnership provides gathering, processing, treating, transportation, and disposal services pursuant to a variety of contracts. Under these arrangements, the Partnership receives fees and/or retains a percentage of products or a percentage of the proceeds from the sale of the customer’s products. These revenues are included in Service revenues and Product sales in the consolidated statements of operations. Payment is generally received from the customer in the month following the service or delivery of the product. Contracts with customers generally have initial terms ranging from 5 to 10 years. 117 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Service revenues – fee based is recognized for fee-based contracts in the month of service based on the volumes delivered by the customer. Producers’ wells or production facilities are connected to the Partnership’s gathering systems for gathering, processing, treating, transportation, and disposal of natural gas, NGLs, condensate, crude oil, and produced water, as applicable. Revenues are valued based on the rate in effect for the month of service when the fee is either the same per-unit rate over the contract term or when the fee escalates and the escalation factor approximates inflation. Deficiency fees charged to customers that do not meet their minimum delivery requirements are recognized as services are performed based on an estimate of the fees that will be billed at the completion of the performance period. Because of its significant upfront capital investment, the Partnership may charge additional service fees to customers for only a portion of the contract term (i.e., for the first year of a contract or until reaching a volume threshold), and these fees are recognized as revenue over the expected period of customer benefit, which is generally the life of the related properties. Timing differences between amounts recognized in Service revenues – fee based and the amounts billed to customer are recognized as contract assets or contract liabilities, and are amortized over the related contract period. Prior to April 1, 2020, the Partnership also recognized revenue and cost of product expense from marketing services performed on behalf of its customers by Occidental. Effective April 1, 2020, changes to marketing-contract terms with Occidental terminated Occidental’s prior status as an agent of the Partnership for third-party sales and established Occidental as a customer of the Partnership. Accordingly, the Partnership no longer recognizes revenue and the equivalent cost of product expense for the marketing services performed by Occidental. See Note 6 . The Partnership also receives Service revenues – fee based from contracts that have fees that require periodic rate redeterminations based on the related facility cost of service. The cost-of-service rates are calculated using a contractually specified rate of return and estimates including long-term assumptions for capital invested, receipt volumes, and operating and maintenance expenses. Certain of these cost-of-service agreements also have minimum-volume-commitment demand fees and guaranteed minimum revenues, in addition to cost-of-service rates. Such contracts include fixed and variable consideration that are recognized on a consistent per-unit rate over the term of the contract. Annual adjustments are made to the cost-of-service rates charged to customers, and a cumulative catch-up revenue adjustment related to services already provided to the minimum volumes under the contract may be recorded in future periods, with revenues for the remaining term of the contract recognized on a consistent per-unit rate based on the total expected variable consideration under the contract. If the Partnership determines it is probable that a significant reversal in the cumulative catch-up revenue adjustment could occur, the variable consideration may be constrained up to the amount of the probable significant reversal. Service revenues – product based includes service revenues from percent-of-proceeds gathering and processing contracts that are recognized net of the cost of product for purchases from the Partnership’s customers since it is acting as the agent in the product sale. Keep-whole agreements, percent-of-product agreements, and certain fee-based contracts that have a fixed-recovery component result in Service revenues – product based being recognized when the natural gas and/or NGLs are received from the customer as non-cash consideration for the services provided. Non-cash consideration for these services is valued at the time the services are provided. Revenue is also recognized in Product sales, along with the cost of product expense related to the sale, when the product received as non-cash consideration is sold to either Occidental or a third party. The Partnership also purchases natural-gas volumes from producers at the wellhead or from a production facility, typically at an index price, and charges the producer fees associated with the downstream gathering and processing services. When the fees relate to services performed after control of the product has transferred to the Partnership, the fees are treated as a reduction of the purchase cost. If the fees relate to services performed before control of the product has transferred to the Partnership, the fees are treated as Service revenues – fee based. Product sales revenue is recognized, along with cost of product expense related to the sale, when the purchased product is sold to either Occidental or a third party. The Partnership receives aid-in-construction reimbursements for certain capital costs necessary to provide services to customers (i.e., connection costs, etc.) under certain service contracts. Aid-in-construction reimbursements are reflected as a contract liability when received and are amortized to Service revenues – fee based over the expected period of customer benefit, which is generally the life of the related properties. 118 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Defined-contribution plan. Employees of the Partnership are eligible to participate in the Western Midstream Savings Plan, a defined - contribution benefit plan maintained by the Partnership. All regular employees may participate in the plan by making elective contributions that are matched by the Partnership, subject to certain limitations. The Partnership also makes other contributions based on plan guidelines. The Partnership recognized expense related to the plan of $ 21.8 million, $ 23.7 million, and $ 12.5 million for the years ended December 31, 2022, 2021, and 2020, respectively. Partnership income taxes. Deferred federal and state income taxes included in the accompanying consolidated financial statements are attributable to temporary differences between the financial statement carrying amount and tax basis of the Partnership’s investment in WES Operating. The Partnership’s accounting policy is to “look through” its investment in WES Operating for purposes of calculating deferred income tax asset and liability balances attributable to the Partnership’s interests in WES Operating. The Partnership had no material uncertain tax positions at December 31, 2022 or 2021. WES Operating income taxes. WES Operating generally is not subject to federal income tax or state income tax other than Texas margin tax on the portion of its income that is apportionable to Texas. Deferred state income taxes are recorded on temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. WES Operating routinely assesses the realizability of its deferred tax assets. If WES Operating concludes that it is more likely than not that some of the deferred tax assets will not be realized, the tax asset is reduced by recording a valuation allowance. With respect to assets previously acquired from Anadarko, WES Operating recorded Anadarko’s historic federal and state current and deferred income taxes for the periods prior to the acquisition of such assets. For periods on and subsequent to the acquisition, WES Operating is not subject to tax except for the Texas margin tax and, accordingly, does not record deferred federal income taxes related to the acquired assets. For periods beginning on and subsequent to the acquisition of assets from Anadarko, WES Operating made payments to Anadarko pursuant to the tax sharing agreement for its estimated share of taxes from all forms of taxation, excluding income taxes imposed by the United States, that are included in any combined or consolidated returns filed by Occidental. The aggregate difference in the basis of WES Operating’s assets for financial and tax reporting purposes cannot be readily determined as WES Operating does not have access to information about each partner’s tax attributes in WES Operating. The accounting standards for uncertain tax positions defines the criteria an individual tax position must satisfy for any part of the benefit of that position to be recognized in the financial statements. WES Operating had no material uncertain tax positions at December 31, 2022 or 2021. Net income (loss) per common unit. The Partnership applies the two-class method in determining net income (loss) per unit applicable to master limited partnerships having multiple classes of securities, including common units and general partner units. The two-class method allocates earnings pursuant to a formula that treats participating securities as having rights to earnings that otherwise would have been available to common unitholders. Under the two-class method, net income (loss) per unit is calculated as if all of the earnings for the period were distributed pursuant to the terms of the relevant contractual arrangement. The accounting guidance provides the methodology for the allocation of undistributed earnings to the general partner and limited partners and the circumstances in which such an allocation should be made. For the Partnership, earnings per unit is calculated based on the assumption that the Partnership distributes cash to its unitholders equal to the net income of the Partnership, notwithstanding the general partner’s ultimate discretion over the amount of cash to be distributed for the period, the existence of other legal or contractual limitations that would prevent distributions of all of the net income for the period, or any other economic or practical limitation on the ability to make a full distribution of the net income for the period. See Note 5 . Net income (loss) per common unit for WES Operating is not calculated because no publicly traded units are outstanding. 119 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Leases. The Partnership determines if an arrangement is a lease based on the rights and obligations conveyed at contract inception. Significant judgment is required when determining whether a customer obtains the right to direct the use of identified property or equipment. When the Partnership is a lessee at the lease-commencement date, a lease is classified as either operating or finance, and right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of future lease payments over the lease term. As the rate implicit in the Partnership’s leases is generally not readily determinable, the Partnership discounts lease liabilities using the Partnership’s incremental borrowing rate at the commencement date. Non-lease components associated with leases that begin in 2019 or later are accounted for as part of the lease component, and prepaid lease payments are included as ROU assets. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Partnership will exercise that option. Leases of 12 months or less are not recognized on the consolidated balance sheets. Lease cost is generally recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized over the lease term using the effective interest method. Variable lease payments are recognized when the obligation for those payments is incurred. When the Partnership is a lessor at the lease-commencement date, a lease is classified as operating, sales-type, or direct financing. The underlying assets associated with these agreements are evaluated for future use beyond the lease term. For operating leases, lease income is generally recognized on a straight-line basis over the lease term. Variable lease payments are recognized when the obligation for those payments is performed. The Partnership does not have sales-type or direct financing leases. For the Partnership’s gathering and processing assets, we elected the practical expedient to not separate lease and non-lease components. When the non-lease component is determined to be the predominant component, the combined components are accounted for under Revenue from Contracts with Customers (Topic 606) . 120 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. REVENUE FROM CONTRACTS WITH CUSTOMERS The following table summarizes revenue from contracts with customers: Year Ended December 31, thousands 2022 2021 2020 Revenue from customers Service revenues – fee based $ 2,602,053 $ 2,283,584 $ 2,360,680 Service revenues – product based 249,692 122,584 48,369 Product sales 399,023 290,947 138,559 Total revenue from customers 3,250,768 2,697,115 2,547,608 Revenue from other than customers Lease revenue (1) — 179,251 223,643 Other 953 789 1,341 Total revenues and other $ 3,251,721 $ 2,877,155 $ 2,772,592 _________________________________________________________________________________________ (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 $ 545.0 million and $ 424.6 million as of December 31, 2022 and 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: Year Ended December 31, thousands 2022 2021 Contract assets balance at beginning of year $ 22,557 $ 56,344 Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period ( 7,683 ) ( 10,380 ) Additional estimated revenues recognized 5,531 120 Cumulative catch-up adjustment for change in estimated consideration 2,156 ( 23,527 ) Contract assets balance at end of year $ 22,561 $ 22,557 December 31, thousands 2022 2021 Other current assets $ 3,381 $ 5,307 Other assets 19,180 17,250 Total contract assets from contracts with customers $ 22,561 $ 22,557 121 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: Year Ended December 31, thousands 2022 2021 Contract liabilities balance at beginning of year $ 313,146 $ 266,937 Cash received or receivable, excluding revenues recognized during the period 71,097 83,326 Revenues recognized that were included in the contract liability balance at the beginning of the period ( 16,158 ) ( 17,265 ) Cumulative catch-up adjustment for change in estimated consideration 1,200 ( 19,852 ) Contract liabilities balance at end of year $ 369,285 $ 313,146 December 31, thousands 2022 2021 Accrued liabilities $ 20,903 $ 27,763 Other liabilities 348,382 285,383 Total contract liabilities from contracts with customers $ 369,285 $ 313,146 Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2022, are presented in the following table. The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes. thousands 2023 $ 1,086,712 2024 1,107,224 2025 1,024,386 2026 874,615 2027 784,781 Thereafter 1,825,720 Total $ 6,703,438 122 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. ACQUISITIONS AND DIVESTITURES 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 were received during the fourth quarter of 2022, resulting in a net gain on sale of $ 109.9 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations. Ranch Westex. In September 2022, the Partnership acquired the remaining 50 % interest in Ranch Westex JV LLC (“Ranch Westex”) from a third party for $ 40.1 million. Subsequent to the acquisition, (i) the Partnership is the sole owner and operator of the asset, (ii) Ranch Westex is no longer accounted for under the equity method of accounting, and (iii) the Ranch Westex processing plant is included as part of the operations of the West Texas complex. Fort Union and Bison facilities. In October 2020, the Partnership (i) sold its 14.81 % interest in Fort Union Gas Gathering, LLC (“Fort Union”), which was accounted for under the equity method of accounting, and (ii) entered into an option agreement to sell the Bison treating facility, located in Northeast Wyoming, to a third party. The Partnership received combined proceeds of $ 27.0 million, resulting in a net gain on sale of $ 21.0 million related to the Fort Union interest that was recorded in the fourth quarter of 2020 as Gain (loss) on divestiture and other, net in the consolidated statements of operations. During the second quarter of 2021, the third party exercised its option to purchase the Bison treating facility and the sale closed. The Partnership received total proceeds of $ 8.0 million, $ 7.0 million in the fourth quarter of 2020 and $ 1.0 million when the sale closed in the second quarter of 2021, resulting in a net gain on sale of $ 5.4 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations. 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 2020 March 31 $ 0.31100 $ 140,893 May 14, 2020 May 1, 2020 June 30 0.31100 140,900 August 13, 2020 July 31, 2020 September 30 0.31100 132,255 November 13, 2020 October 30, 2020 December 31 0.31100 131,265 February 12, 2021 February 1, 2021 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 December 31 0.50000 196,569 February 13, 2023 February 1, 2023 123 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. PARTNERSHIP DISTRIBUTIONS 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 2020 March 31 $ 143,404 May 2020 June 30 143,404 August 2020 September 30 143,404 November 2020 December 31 127,470 February 2021 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 December 31 213,513 February 2023 In addition to the distributions above, during the years ended December 31, 2022 and 2021, WES Operating made distributions of $ 463.8 million and $ 204.1 million, respectively, to the Partnership and WGRAH. The Partnership used its portion of the distribution to repurchase common units. See Note 5 . 124 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 December 31, 2022, Occidental held 190,281,578 common units, representing a 48.4 % 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 193,789,406 common units, representing a 49.3 % limited partner interest in the Partnership. In March 2021, an affiliate of Occidental sold 11,500,000 of the Partnership’s common units it held through an underwritten offering, including 1,500,000 common units pursuant to the full exercise of the underwriters’ over - allotment option. The Partnership did not receive any proceeds from the public offering. On September 11, 2020, the Partnership assigned its 98 % interest in the 30 - year $ 260.0 million note established in May 2008 between WES Operating and Anadarko (the “Anadarko note receivable”) to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units representing limited partner interests in the Partnership to the Partnership. The units were canceled by the Partnership immediately upon receipt. See Note 6. 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. In November 2022, the Board authorized an increase in the program to $ 1.25 billion (the “$1.25 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 year ended December 31, 2022, the Partnership repurchased 19,532,305 common units, which includes 10,000,000 common units repurchased from Occidental, for an aggregate purchase price of $ 487.6 million. The units were canceled immediately upon receipt. As of December 31, 2022, the Partnership had an authorized amount of $ 762.4 million remaining under the program. In November 2020, the Board authorized the Partnership to buy back up to $ 250.0 million of the Partnership’s common units through December 31, 2021 (the “$250.0 million Purchase Program”). The common units were purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. The Partnership repurchased 8,707,869 and 2,368,711 common units on the open market during the years ended December 31, 2021 and 2020, respectively, for an aggregate purchase price of $ 167.2 million and $ 32.5 million, respectively. In addition, the Partnership repurchased 2,500,000 common units from Occidental during the year ended December 31, 2021, for an aggregate purchase price of $ 50.2 million. The units were canceled by the Partnership immediately upon receipt. As of December 31, 2021, the entire $ 250.0 million authorized program had been fulfilled. Holdings of WES Operating equity. As of December 31, 2022, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0 % limited partner interest and the entire non - economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0 % limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1 ). Partnership’s net income (loss) per common unit. The common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses in accordance with their weighted - average ownership percentage during each period using the two - class method. The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted - average number of common units outstanding during the period. Diluted net income (loss) per common unit includes the effect of outstanding units issued under the Partnership’s long-term incentive plans. 125 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. EQUITY AND PARTNERS’ CAPITAL The following table provides a reconciliation between basic and diluted net income (loss) per common unit: Year Ended December 31, thousands except per-unit amounts 2022 2021 2020 Net income (loss) Limited partners’ interest in net income (loss) $ 1,189,562 $ 896,477 $ 515,908 Weighted-average common units outstanding Basic 394,951 411,309 435,554 Dilutive effect of non-vested phantom units 1,285 713 70 Diluted 396,236 412,022 435,624 Excluded due to anti-dilutive effect 554 589 997 Net income (loss) per common unit Basic $ 3.01 $ 2.18 $ 1.18 Diluted $ 3.00 $ 2.18 $ 1.18 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 Year Ended December 31, thousands 2022 2021 2020 Revenues and other Service revenues – fee based $ 1,674,959 $ 1,589,367 $ 1,740,999 Service revenues – product based 56,907 11,888 8,509 Product sales 63,367 31,103 71,104 Total revenues and other 1,795,233 1,632,358 1,820,612 Equity income, net – related parties (1) 183,483 204,645 226,750 Operating expenses Cost of product (2) ( 25,447 ) 42,805 92,884 Operation and maintenance 5,081 27,805 49,533 General and administrative (3) 2,338 15,613 40,295 Total operating expenses ( 18,028 ) 86,223 182,712 Gain (loss) on divestiture and other, net ( 1,756 ) 420 ( 2,870 ) Interest income – Anadarko note receivable — — 11,736 _________________________________________________________________________________________ (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 years ended December 31, 2021 and 2020, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ). 126 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. RELATED-PARTY TRANSACTIONS Consolidated balance sheets December 31, thousands 2022 2021 Assets Accounts receivable, net $ 313,937 $ 180,205 Other current assets 1,578 12,490 Equity investments (1) 944,696 1,167,187 Other assets 29,058 45,494 Total assets 1,289,269 1,405,376 Liabilities Accounts and imbalance payables 32,150 49,242 Accrued liabilities 11,756 13,914 Other liabilities 268,399 207,365 Total liabilities 312,305 270,521 _________________________________________________________________________________________ (1) See Note 7 . Consolidated statements of cash flows Year Ended December 31, thousands 2022 2021 2020 Distributions from equity - investment earnings – related parties $ 186,153 $ 213,516 $ 246,637 Capital expenditures ( 470 ) ( 2,000 ) — Contributions to equity investments – related parties ( 9,632 ) ( 4,435 ) ( 19,388 ) Distributions from equity investments in excess of cumulative earnings – related parties 63,897 41,385 32,160 Distributions to Partnership unitholders (1) ( 372,468 ) ( 272,192 ) ( 381,949 ) Distributions to WES Operating unitholders (2) ( 24,898 ) ( 14,984 ) ( 15,434 ) Net contributions from (distributions to) related parties 1,423 8,533 24,466 Proceeds from the sale of assets to related parties 200 — — Finance lease payments (3) — — ( 6,382 ) Unit repurchases from Occidental (4) ( 252,500 ) ( 50,225 ) — _________________________________________________________________________________________ (1) Represents common and general partner unit 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) Included in Other cash flows from financing activities in the consolidated statements of cash flows. (4) Represents common units repurchased from Occidental (see Note 5 ). 127 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Year Ended December 31, thousands 2022 2021 2020 General and administrative (1) $ 5,373 $ 18,365 $ 41,609 _________________________________________________________________________________________ (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 years ended December 31, 2021 and 2020, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ). Consolidated balance sheets December 31, thousands 2022 2021 Accounts receivable, net $ 313,937 $ 180,205 Other current assets 1,487 12,490 Other assets 28,459 45,494 Accounts and imbalance payables (1) 76,131 97,749 Accrued liabilities 11,439 13,597 _________________________________________________________________________________________ (1) Includes balances related to transactions between the Partnership and WES Operating. Consolidated statements of cash flows Year Ended December 31, thousands 2022 2021 2020 Distributions to WES Operating unitholders (1) $ ( 1,244,533 ) $ ( 749,018 ) $ ( 771,546 ) _________________________________________________________________________________________ (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 %, 36 %, and 41 % for the years ended December 31, 2022, 2021, and 2020, respectively. Crude - oil and NGLs throughput (excluding equity - investment throughput) attributable to production owned or controlled by Occidental was 89 %, 89 %, and 88 % for the years ended December 31, 2022, 2021, and 2020, respectively. Produced - water throughput attributable to production owned or controlled by Occidental was 80 %, 87 %, and 87 % for the years ended December 31, 2022, 2021, and 2020, respectively. 128 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Commodity purchase and sale agreements. Through December 31, 2020, the Partnership purchased and sold a significant amount of natural gas and NGLs from and to Anadarko Energy Services Company (“AESC”), a marketing affiliate of Occidental. Prior to April 1, 2020, AESC acted as an agent on behalf of either the Partnership or the Partnership’s customers for third - party sales. Where AESC sold natural gas and NGLs on the Partnership’s customers’ behalf, the Partnership recognized associated service revenues and cost of product expense for the marketing services performed by AESC. When product sales were on the Partnership’s behalf, the Partnership recognized product sales revenues based on Occidental’s sales price to the third party and recorded the associated cost of product expense associated with the marketing activities provided by AESC. Effective April 1, 2020, changes to marketing - contract terms with AESC terminated AESC’s prior status as an agent of the Partnership for third - party sales and established AESC as a customer of the Partnership. Accordingly, the Partnership no longer recognizes service revenues and/or product sales revenues and the equivalent cost of product expense for the marketing services performed by AESC. This change has no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non - GAAP metric used to evaluate the Partnership’s operations (see Reconciliation of Non-GAAP Financial Measures under Part II, Item 7 of this Form 10-K). 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, on January 1, 2021, the Partnership began marketing and selling substantially all of its crude oil and residue gas, and a majority of its NGLs, directly to third parties. 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. In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021. See Note 14 . 129 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. RELATED-PARTY TRANSACTIONS 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 Commodity purchase and sale agreements and Marketing Transition Services Agreement in the sections above. Related - party expenses do not bear a direct relationship to related - party revenues, and third - party expenses do not bear a direct relationship to third - party revenues. 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 $ 2.3 million, $ 10.1 million, and $ 14.6 million for the years ended December 31, 2022, 2021, and 2020, respectively. These amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. As of December 31, 2022, there is no unrecognized compensation expense attributable to the Incentive Plans. Construction reimbursement agreements and purchases and sales with 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 and sells equipment, inventory, and other miscellaneous assets from or to 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. Anadarko note receivable. In May 2008, WES Operating loaned $ 260.0 million to Anadarko in exchange for a 30 - year note that bore interest at a fixed annual rate and was classified as interest income in the consolidated statements of operations. On September 11, 2020, the Partnership and Occidental entered into a Unit Redemption Agreement, pursuant to which WES Operating transferred the note receivable to Anadarko, which Anadarko immediately canceled and retired upon receipt (see Note 5 ). 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. 130 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. EQUITY INVESTMENTS The following tables present the financial statement impact of the Partnership’s equity investments for the years ended December 31, 2021 and 2022: thousands Balance at December 31, 2020 Other-than-temporary impairment expense (1) Equity income, net Contributions Distributions Distributions in excess of cumulative earnings (2) Balance at December 31, 2021 White Cliffs $ 45,623 $ — $ 780 $ — $ ( 199 ) $ ( 5,451 ) $ 40,753 Rendezvous 28,198 — ( 2,155 ) — ( 1,103 ) ( 2,865 ) 22,075 Mont Belvieu JV 98,874 — 33,991 — ( 33,944 ) ( 2,193 ) 96,728 TEG 16,661 — 4,508 — ( 4,533 ) ( 520 ) 16,116 TEP 195,189 — 36,547 — ( 36,797 ) ( 6,014 ) 188,925 FRP 199,881 — 38,280 750 ( 38,275 ) ( 4,004 ) 196,632 Whitethorn LLC 156,729 — 4,969 349 ( 6,428 ) ( 5,929 ) 149,690 Cactus II 173,921 — 18,237 3,336 ( 18,404 ) ( 5,796 ) 171,294 Saddlehorn 111,717 — 30,878 — ( 31,403 ) ( 751 ) 110,441 Panola 20,867 — 2,188 — ( 2,188 ) ( 823 ) 20,044 Mi Vida 55,031 — 10,491 — ( 10,596 ) ( 3,163 ) 51,763 Ranch Westex 18,898 ( 11,805 ) 12,407 — ( 15,657 ) ( 2,864 ) 979 Red Bluff Express 103,224 — 13,524 — ( 13,989 ) ( 1,012 ) 101,747 Total $ 1,224,813 $ ( 11,805 ) $ 204,645 $ 4,435 $ ( 213,516 ) $ ( 41,385 ) $ 1,167,187 _________________________________________________________________________________________ (1) Recorded in Long-lived asset and other impairments in the consolidated statements of operations. (2) Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual - investment basis. thousands Balance at December 31, 2021 Other-than-temporary impairment expense (1) Equity income, net Contributions Distributions Distributions in excess of cumulative earnings (2) Acquisitions and Divestitures Balance at December 31, 2022 White Cliffs $ 40,753 $ ( 19,883 ) $ ( 1,086 ) $ — $ ( 32 ) $ ( 3,657 ) $ — $ 16,095 Rendezvous 22,075 — ( 2,582 ) — ( 677 ) ( 2,702 ) — 16,114 Mont Belvieu JV 96,728 — 29,475 — ( 29,599 ) ( 5,294 ) — 91,310 TEG 16,116 — 6,384 75 ( 6,407 ) ( 312 ) — 15,856 TEP 188,925 — 44,650 — ( 44,902 ) ( 3,986 ) — 184,687 FRP 196,632 — 45,841 455 ( 46,193 ) ( 4,019 ) — 192,716 Whitethorn LLC 149,690 — ( 3,417 ) 281 5,223 ( 5,182 ) — 146,595 Cactus II 171,294 — 11,696 — ( 11,835 ) ( 18,085 ) ( 153,070 ) — Saddlehorn 110,441 — 21,491 — ( 21,034 ) ( 6,707 ) — 104,191 Panola 20,044 — 2,343 — ( 2,212 ) ( 864 ) — 19,311 Mi Vida 51,763 — 11,316 — ( 11,113 ) ( 3,104 ) — 48,862 Ranch Westex 979 — 3,392 — ( 3,392 ) ( 8,376 ) 7,397 — Red Bluff Express 101,747 — 13,980 8,821 ( 13,980 ) ( 1,609 ) — 108,959 Total $ 1,167,187 $ ( 19,883 ) $ 183,483 $ 9,632 $ ( 186,153 ) $ ( 63,897 ) $ ( 145,673 ) $ 944,696 _________________________________________________________________________________________ (1) Recorded in Long-lived asset and other impairments in the consolidated statements of operations. (2) Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual - investment basis. 131 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. EQUITY INVESTMENTS The investment balance in White Cliffs at December 31, 2022, is $ 23.9 million less than the Partnership’s underlying equity in White Cliffs’ net assets. During the year ended December 31, 2022, the Partnership recognized an impairment loss of $ 19.9 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 $ 16.1 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. The investment balance in Rendezvous at December 31, 2022, includes $ 23.9 million for the purchase price allocated to the investment in Rendezvous in excess of the historic cost basis of Western Gas Resources, Inc. (“WGRI”), the entity that previously owned the interest in Rendezvous, which Anadarko acquired in August 2006. This excess balance is attributable to the difference between the fair value and book value of such gathering and treating facilities (at the time WGRI was acquired by Anadarko) and will be amortized to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of those facilities. The investment balance in Whitethorn LLC at December 31, 2022, is $ 33.9 million less than the Partnership’s underlying equity in Whitethorn LLC’s net assets, primarily due to terms of the acquisition agreement which provided the Partnership a share of pre-acquisition operating cash flow. This difference will be accreted to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of Whitethorn. The investment balance in Saddlehorn at December 31, 2022, was $ 17.7 million less than the Partnership’s underlying equity in Saddlehorn’s net assets, primarily due to income from an expansion project that was funded by Saddlehorn’s other owners being disproportionately allocated to the Partnership beginning in the second quarter of 2020. This difference will be accreted to Equity income, net – related parties in the consolidated statements of operations over the remaining estimated useful life of the Saddlehorn pipeline. 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 years ended December 31, 2021 and 2020, the Partnership recognized impairment losses of $ 11.8 million and $ 29.4 million, respectively, that resulted from a decline in value below the carrying value, which was determined to be other than temporary in nature. In November 2022, the Partnership sold its 15.00 % interest in Cactus II to two third parties. See Note 3. Management evaluates its equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of such investments may have experienced a decline in value that is other than temporary. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether the investment has been impaired. Management assesses the fair value of equity investments using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss in the consolidated statements of operations. 132 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. EQUITY INVESTMENTS The following tables present the summarized combined financial information for equity investments (amounts represent 100% of investee financial information): Year Ended December 31, thousands 2022 2021 2020 Revenues $ 1,922,733 $ 1,808,791 $ 1,635,132 Operating income 661,779 946,299 1,045,889 Net income 661,916 945,801 1,045,076 December 31, thousands 2022 2021 Current assets $ 293,539 $ 398,696 Property, plant, and equipment, net 4,278,398 5,442,565 Other assets 52,163 182,323 Total assets $ 4,624,100 $ 6,023,584 Current liabilities $ 123,897 $ 157,099 Non-current liabilities 17,660 24,713 Equity 4,482,543 5,841,772 Total liabilities and equity $ 4,624,100 $ 6,023,584 8. INCOME TAXES The Partnership is not a taxable entity for U.S. federal income tax purposes; therefore, the federal statutory rate is zero percent. However, income apportionable to Texas is subject to Texas margin tax. For the years ended December 31, 2022 and 2020, the variance from the federal statutory rate was primarily due to the Texas margin tax liability. For the year ended December 31, 2021, the variance from the federal statutory rate was primarily impacted by a state margin rate reduction associated with Occidental’s settlement of state audit matters and the Texas margin tax liability. The components of income tax expense (benefit) are as follows: Year Ended December 31, thousands 2022 2021 2020 Current state income tax expense (benefit) $ 2,188 $ ( 37 ) $ 2,702 Deferred state income tax expense (benefit) 1,999 ( 9,770 ) 3,296 Total income tax expense (benefit) $ 4,187 $ ( 9,807 ) $ 5,998 133 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. INCOME TAXES Total income taxes differed from the amounts computed by applying the statutory income tax rate to income (loss) before income taxes. The sources of these differences are as follows: Year Ended December 31, thousands except percentages 2022 2021 2020 Income (loss) before income taxes $ 1,255,643 $ 934,192 $ 522,850 Statutory tax rate — % — % — % Tax computed at statutory rate $ — $ — $ — Adjustments resulting from: Texas margin tax expense (benefit) (1) 4,187 ( 9,807 ) 5,998 Income tax expense (benefit) $ 4,187 $ ( 9,807 ) $ 5,998 Effective tax rate — % ( 1 ) % 1 % _________________________________________________________________________________________ (1) Includes a tax benefit of $ 12.5 million for the year ended December 31, 2021, related to a reduced Texas margin tax rate resulting from Occidental’s settlement of state audit matters. The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows: December 31, thousands 2022 2021 Depreciable property $ ( 14,114 ) $ ( 12,395 ) Other intangible assets ( 603 ) ( 486 ) Other 293 456 Net long-term deferred income tax liabilities $ ( 14,424 ) $ ( 12,425 ) 134 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. PROPERTY, PLANT, AND EQUIPMENT A summary of the historical cost of property, plant, and equipment is as follows: December 31, thousands Estimated Useful Life 2022 2021 Land N/A $ 10,982 $ 10,955 Gathering systems – pipelines 30 years 5,519,592 5,386,003 Gathering systems – compressors 15 years 2,266,410 2,172,953 Processing complexes and treating facilities 25 years 3,419,201 3,375,317 Transportation pipeline and equipment 4 to 48 years 174,241 169,356 Produced - water disposal systems 20 years 932,627 882,527 Assets under construction N/A 263,353 98,473 Other 3 to 40 years 779,187 750,494 Total property, plant, and equipment 13,365,593 12,846,078 Less accumulated depreciation 4,823,993 4,333,171 Net property, plant, and equipment $ 8,541,600 $ 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 impairments. During the year ended December 31, 2021, the Partnership recognized a long-lived asset impairment of $ 14.2 million at the DJ Basin complex due to cancellation of projects. During the year ended December 31, 2020, the Partnership recognized a long-lived asset impairment of $ 150.2 million for assets located in Wyoming and Utah. These assets were impaired to estimated fair values of $ 112.2 million. The Partnership assesses whether events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of assets with impairment triggers were measured using the income approach and Level - 3 fair value inputs. The income approach was based on the Partnership’s projected future EBITDA and free cash flows, which requires significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs. These impairments were primarily triggered by reductions in estimated future cash flows resulting from lower forecasted producer throughput and lower commodity prices. The remaining long-lived asset impairments of $ 24.3 million were primarily at the DJ Basin complex and DBM oil system due to the cancellation of projects and impairments of rights - of - way. 135 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. GOODWILL AND OTHER INTANGIBLES Goodwill. Goodwill is recorded when the purchase price of a business acquired exceeds the fair market value of the tangible and separately measurable intangible net assets. Goodwill also includes the allocated historic carrying value of midstream goodwill attributed to the Partnership’s assets previously acquired from Anadarko. The Partnership’s goodwill has been allocated to two reporting units: (i) gathering and processing and (ii) transportation. The Partnership evaluates goodwill for impairment at the reporting - unit level on an annual basis, as of October 1, or more often as facts and circumstances warrant. An initial qualitative assessment is performed to determine the likelihood of whether goodwill is impaired and if deemed necessary based on this assessment, a quantitative assessment is then performed. If the quantitative assessment indicates that the carrying value of the reporting unit, including goodwill, exceeds its fair value, a goodwill impairment is recorded for the amount by which the reporting unit’s carrying value exceeds its fair value. During the three months ended March 31, 2020, the Partnership performed an interim goodwill impairment test due to a significant decline in the trading price of the Partnership’s common units, triggered by the combined impacts from the global outbreak of COVID - 19 and the oil - market disruption resulting from significantly lower global demand and corresponding oversupply of crude oil. The Partnership primarily used the market approach and Level - 3 inputs to estimate the fair value of its two reporting units. The market approach was based on multiples of EBITDA and the Partnership’s projected future EBITDA. The EBITDA multiples were based on current and historic multiples for comparable midstream companies of similar size and business profit to the Partnership. The EBITDA projections require significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs. The reasonableness of the market approach was tested against an income approach that was based on a discounted cash - flow analysis. Key assumptions in this analysis include the use of an appropriate discount rate, terminal - year multiples, and estimated future cash flows, including estimates of throughput, capital expenditures, and operating and general and administrative costs. The Partnership also reviewed the reasonableness of the total fair value of both reporting units to the market capitalization as of March 31, 2020, and the reasonableness of an implied acquisition premium. Impairment determinations involve significant assumptions and judgments, and differing assumptions regarding any of these inputs could have a significant effect on the valuations. As a result of the interim impairment test, the Partnership recognized a goodwill impairment of $ 441.0 million during the first quarter of 2020, which reduced the carrying value of goodwill for the gathering and processing reporting unit to zero . Goodwill allocated to the transportation reporting unit of $ 4.8 million as of March 31, 2020, was not impaired. The Partnership’s annual qualitative goodwill impairment assessment as of October 1, 2022, indicated no further impairment. Qualitative factors also were assessed in the fourth quarter of 2022 to review any changes in circumstances subsequent to the annual test. This assessment also indicated no impairment. 136 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. GOODWILL AND OTHER INTANGIBLES Other intangible assets. The other intangible assets balance on the consolidated balance sheets includes the fair value, net of amortization, primarily related to (i) contracts assumed in connection with processing plant acquisitions in 2011 that are part of the DJ Basin complex, which are being amortized on a straight-line basis over 38 years and (ii) contracts assumed in connection with the DBM acquisition in November 2014, which are being amortized on a straight-line basis over 30 years. The Partnership assesses other intangible assets for impairment together with related underlying long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. See Property, plant, and equipment and other intangible assets in Note 1 for further discussion of management’s process to evaluate potential impairment of long-lived assets. The following table presents the gross carrying value and accumulated amortization of other intangible assets: December 31, thousands 2022 2021 Gross carrying value $ 979,863 $ 979,863 Accumulated amortization ( 266,788 ) ( 235,121 ) Other intangible assets $ 713,075 $ 744,742 Amortization expense for intangible assets was $ 31.7 million, $ 31.7 million, and $ 33.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. Intangible asset amortization to be recorded in each of the next five years is estimated to be $ 31.7 million per year. 137 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. SELECTED COMPONENTS OF WORKING CAPITAL A summary of accounts receivable, net is as follows: The Partnership WES Operating December 31, December 31, thousands 2022 2021 2022 2021 Trade receivables, net $ 548,859 $ 431,649 $ 548,859 $ 431,649 Other receivables, net 5,404 4,864 5,404 4,864 Total accounts receivable, net $ 554,263 $ 436,513 $ 554,263 $ 436,513 A summary of other current assets is as follows: The Partnership WES Operating December 31, December 31, thousands 2022 2021 2022 2021 NGLs inventory $ 3,797 $ 3,370 $ 3,797 $ 3,370 Imbalance receivables 32,658 25,309 32,658 25,309 Prepaid insurance 13,262 10,369 11,139 8,538 Contract assets 3,381 5,307 3,381 5,307 Other 6,408 1,897 6,316 1,897 Total other current assets $ 59,506 $ 46,252 $ 57,291 $ 44,421 A summary of accrued liabilities is as follows: The Partnership WES Operating December 31, December 31, thousands 2022 2021 2022 2021 Accrued interest expense $ 110,486 $ 131,177 $ 110,486 $ 131,177 Short - term asset retirement obligations 10,493 9,934 10,493 9,934 Short - term remediation and reclamation obligations 5,383 7,454 5,383 7,454 Income taxes payable 2,428 1,516 2,428 1,516 Contract liabilities 20,903 27,763 20,903 27,763 Accrued payroll and benefits 44,855 41,311 — 20 Other 60,092 44,094 47,596 32,829 Total accrued liabilities $ 254,640 $ 263,249 $ 197,289 $ 210,693 138 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. ASSET RETIREMENT OBLIGATIONS The following table provides a summary of changes in asset retirement obligations: Year Ended December 31, thousands 2022 2021 Carrying amount of asset retirement obligations at beginning of year $ 308,209 $ 280,498 Liabilities incurred 10,513 23,923 Liabilities settled ( 10,115 ) ( 12,710 ) Accretion expense 14,474 12,664 Revisions in estimated liabilities ( 22,567 ) 3,834 Carrying amount of asset retirement obligations at end of year $ 300,514 $ 308,209 Revisions in estimated liabilities for the year ended December 31, 2022, primarily related to a reduction in expected settlement costs at the West Texas and Brasada complexes, as well as the DBM oil and DBM water systems, partially offset by an increase in expected settlement costs at the Red Desert, Granger, and DJ Basin complexes, and at the Highlight system. 139 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. 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: December 31, 2022 December 31, 2021 thousands Principal Carrying Value Fair Value (1) Principal Carrying Value Fair Value (1) Short - term debt Floating - Rate Senior Notes due 2023 $ 213,138 $ 213,121 $ 214,823 $ — $ — $ — 4.000 % Senior Notes due 2022 — — — 502,246 502,138 505,153 Finance lease liabilities 2,659 2,659 2,659 3,794 3,794 3,794 Total short - term debt $ 215,797 $ 215,780 $ 217,482 $ 506,040 $ 505,932 $ 508,947 Long - term debt Floating - Rate Senior Notes due 2023 $ — $ — $ — $ 213,138 $ 212,642 $ 213,072 3.100 % Senior Notes due 2025 730,706 727,953 692,491 732,106 728,096 764,815 3.950 % Senior Notes due 2025 399,163 396,825 379,107 399,163 395,928 418,506 4.650 % Senior Notes due 2026 474,242 472,161 452,201 474,242 471,629 516,473 4.500 % Senior Notes due 2028 400,000 396,698 368,346 400,000 396,145 437,673 4.750 % Senior Notes due 2028 400,000 397,340 368,141 400,000 396,938 444,550 4.050 % Senior Notes due 2030 1,200,000 1,191,345 1,053,038 1,200,000 1,190,339 1,323,595 5.450 % Senior Notes due 2044 600,000 593,878 503,742 600,000 593,733 717,804 5.300 % Senior Notes due 2048 700,000 687,494 580,570 700,000 687,265 844,223 5.500 % Senior Notes due 2048 350,000 342,783 291,194 350,000 342,659 418,907 5.250 % Senior Notes due 2050 1,000,000 983,945 829,804 1,000,000 983,709 1,183,514 RCF 375,000 375,000 375,000 — — — Finance lease liabilities 4,160 4,160 4,160 1,533 1,533 1,533 Total long - term debt $ 6,633,271 $ 6,569,582 $ 5,897,794 $ 6,470,182 $ 6,400,616 $ 7,284,665 _________________________________________________________________________________________ (1) Fair value is measured using the market approach and Level - 2 fair value inputs. 140 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. DEBT AND INTEREST EXPENSE Debt activity. The following table presents the debt activity for the years ended December 31, 2022 and 2021: thousands Carrying Value Balance at December 31, 2020 $ 7,854,702 RCF borrowings 480,000 Repayments of RCF borrowings ( 480,000 ) Repayment of 5.375 % Senior Notes due 2021 ( 431,081 ) Repayment of 4.000 % Senior Notes due 2022 ( 78,671 ) Repayment of Floating-Rate Senior Notes due 2023 ( 26,840 ) Repayment of 3.100 % Senior Notes due 2025 ( 267,894 ) Repayment of 3.950 % Senior Notes due 2025 ( 100,837 ) Repayment of 4.650 % Senior Notes due 2026 ( 25,758 ) Finance lease liabilities ( 26,582 ) Other 9,509 Balance at December 31, 2021 $ 6,906,548 RCF borrowings 1,390,000 Repayments of RCF borrowings ( 1,015,000 ) Repayment of 4.000 % Senior Notes due 2022 ( 502,246 ) Repayment of 3.100 % Senior Notes due 2025 ( 1,400 ) Finance lease liabilities 1,493 Other 5,967 Balance at December 31, 2022 $ 6,785,362 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 December 31, 2022, and were 4.542 %, 5.424 %, and 6.629 %, respectively, at December 31, 2021. The interest rate on the Floating - Rate Senior Notes was 5.04 % and 1.97 % at December 31, 2022 and 2021, respectively. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating. During the 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 (see Debt activity above). During the first quarter of 2021, WES Operating redeemed the total principal amount outstanding of the 5.375 % Senior Notes due 2021 at par value, pursuant to the optional redemption terms in WES Operating’s indenture. For the year ended December 31, 2021, losses of $ 24.9 million were recognized for the early retirement of these notes. As of December 31, 2022, the Floating-Rate Senior Notes were classified as short-term debt on the consolidated balance sheet, and in January 2023, WES Operating redeemed the total principal amount outstanding at par value with cash on hand. As of December 31, 2022, WES Operating was in compliance with all covenants under the relevant governing indentures. 141 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. DEBT AND INTEREST EXPENSE 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. The RCF bears interest at an Adjusted Term SOFR (as defined in the RCF amendment), plus applicable margins ranging from 1.00 % to 1.70 %, or an alternate base rate equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.50 %, or (c) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00 %, in each case plus applicable margins currently ranging from zero to 0.70 %, based on WES Operating’s senior unsecured debt rating. A required quarterly facility fee is paid ranging from 0.125 % to 0.300 % of the commitment amount (whether drawn or undrawn), which also is based on the senior unsecured debt rating. As of December 31, 2022, there were $ 375.0 million of outstanding borrowings and $ 5.1 million of outstanding letters of credit, resulting in $ 1.6 billion of available borrowing capacity under the RCF. As of December 31, 2022 and 2021, the interest rate on any outstanding RCF borrowings was 5.92 % and 1.60 %, respectively. The facility - fee rate was 0.25 % at December 31, 2022 and 2021. As of December 31, 2022, the outstanding borrowings under the RCF were classified as long-term debt on the consolidated balance sheet and WES Operating was in compliance with all covenants under the RCF. Term loan facility. In January 2020, WES Operating repaid the outstanding borrowings with proceeds from the issuance of the Fixed - Rate Senior Notes and Floating - Rate Senior Notes and terminated its $ 3.0 billion senior unsecured credit facility (“Term loan facility”). During the first quarter of 2020, a loss of $ 2.3 million was recognized for the early termination of the Term loan facility. Interest-rate swaps. For the year ended December 31, 2020, WES Operating made cash payments totaling $ 25.6 million to settle interest rate swaps that were entered into in 2018 and 2019. These cash payments were classified as cash flows from operating activities in the consolidated statements of cash flows. Finance lease liabilities. The Partnership subleased equipment from Occidental via finance leases through April 2020. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles. Certain of these equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification. As a result, these leases were classified as operating leases. See Note 14—Leases . Interest expense. The following table summarizes the amounts included in interest expense: Year Ended December 31, thousands 2022 2021 2020 Long - term and short - term debt $ ( 326,949 ) $ ( 366,570 ) $ ( 369,815 ) Finance lease liabilities ( 414 ) ( 861 ) ( 1,516 ) Commitment fees and amortization of debt-related costs ( 12,212 ) ( 12,705 ) ( 13,501 ) Capitalized interest 5,636 3,624 4,774 Interest expense $ ( 333,939 ) $ ( 376,512 ) $ ( 380,058 ) 142 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. LEASES The Partnership adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019, using the modified retrospective method applied to all leases in existence on January 1, 2019. The Partnership elected not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for existing or expired land easements, and not to recognize ROU assets or lease liabilities for short-term leases. Lessee. The Partnership has entered into operating leases for corporate offices, shared field offices, easements, and equipment supporting the Partnership’s operations, with both Occidental and third parties as lessors. The Partnership also had subleased equipment from Occidental via finance leases that extended through April 2020. During the first quarter of 2020, the Partnership entered into finance leases with third parties for equipment and vehicles. Certain of these equipment leases were amended during the third quarter of 2021 requiring reassessment of lease classification. As a result, these leases were classified as operating leases. The following table summarizes information related to the Partnership’s leases: December 31, 2022 2021 thousands except lease term and discount rate Operating Leases Finance Leases Operating Leases Finance Leases Assets Other assets $ 67,087 $ — $ 71,725 $ — Net property, plant, and equipment — 7,402 — 5,449 Total lease assets (1) $ 67,087 $ 7,402 $ 71,725 $ 5,449 Liabilities Accrued liabilities $ 10,342 $ — $ 10,558 $ — Short-term debt — 2,659 — 3,794 Other liabilities 33,318 — 35,442 — Long-term debt — 4,160 — 1,533 Total lease liabilities (1) $ 43,660 $ 6,819 $ 46,000 $ 5,327 Weighted-average remaining lease term (years) 8 6 8 2 Weighted-average discount rate (%) 4.5 8.2 4.1 3.4 ________________________________________________________________________________________ (1) For the years ended December 31, 2022 and 2021, includes additions to ROU assets of $ 8.3 million and $ 44.9 million, respectively, and additions to lease liabilities of $ 8.3 million and $ 14.9 million, respectively, related to operating leases. Includes additions to ROU assets and lease liabilities of $ 7.1 million and $ 0.9 million related to finance leases for the years ended December 31, 2022 and 2021, respectively. The following table summarizes the Partnership’s lease cost: Year Ended December 31, thousands 2022 2021 2020 Operating lease cost $ 14,767 $ 10,753 $ 7,702 Short-term lease cost 38,875 37,616 43,102 Variable lease cost 5,611 2,628 ( 46 ) Sublease income ( 414 ) ( 414 ) ( 414 ) Finance lease cost Amortization of ROU assets 5,377 7,151 8,346 Interest on lease liabilities 414 861 1,516 Total lease cost $ 64,630 $ 58,595 $ 60,206 143 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. LEASES The following table summarizes cash paid for amounts included in the measurement of lease liabilities: Year Ended December 31, 2022 2021 2020 thousands Operating Leases Finance Leases Operating Leases Finance Leases Operating Leases Finance Leases Operating cash flows $ 13,616 $ 229 $ 5,805 $ 861 $ 5,750 $ 1,516 Financing cash flows — 4,318 — 6,513 — 14,207 The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities at December 31, 2022: thousands Operating Leases Finance Leases 2023 $ 10,517 $ 2,720 2024 7,877 1,424 2025 5,769 3,810 2026 4,450 52 2027 4,332 — Thereafter 19,289 — Total lease payments 52,234 8,006 Less portion representing imputed interest 8,574 1,187 Total lease liabilities $ 43,660 $ 6,819 Lessor. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude - oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts include (i) fixed consideration, which is measured as the minimum - volume commitment for both gathering and treating, and (ii) variable consideration, which consists of all volumes above the minimum - volume commitment. Subsequent to the initial two - year term, the agreement provides for automatic one - year extensions, unless either party exercises its option to terminate the lease with advance notice. In April 2021, the Partnership exercised its option to terminate the operating and maintenance agreement with Occidental effective December 31, 2021. For the years ended December 31, 2021 and 2020, the Partnership recognized fixed-lease revenue of $ 175.8 million and $ 175.8 million, respectively, and variable-lease revenue of $ 3.5 million and $ 47.9 million, respectively, related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations. In December 2021, one of the Partnership’s processing agreements was amended. The amended contract was determined to be a lease agreement; however, the Partnership elected the practical expedient to combine the lease and the non-lease components, which consists of processing and stabilization services, into a single service component and will account for the contract under Revenue from Contracts with Customers (Topic 606) . 144 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. EQUITY-BASED COMPENSATION The general partner has the authority to grant equity compensation awards to its outside directors, executive officers, and employees under the Western Gas Partners, LP 2017 Long-Term Incentive Plan (the “2017 LTIP”) and the Western Midstream Partners, LP 2021 Long - Term Incentive Plan (the “2021 LTIP”). These plans are collectively referred to as the “WES LTIPs.” The 2017 LTIP and the 2021 LTIP permit the issuance of up to 3,431,251 and 9,500,000 units, respectively, of which 1,928,415 and 9,500,000 units, respectively, remained available for future issuance as of December 31, 2022. The Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan expired during the year ended December 31, 2022. On March 22, 2021, the Board approved the 2021 LTIP. Subject to the capitalization adjustment provisions included in the 2021 LTIP, the total aggregate number of common units that may be delivered with respect to awards under the 2021 LTIP is 9,500,000 (the “2021 LTIP Limit”). Common units withheld from an award or surrendered by a participant to satisfy tax withholding obligations or to satisfy the payment of any exercise price with respect to an award will not be considered to be common units delivered under the 2021 LTIP for purposes of the 2021 LTIP Limit. If any award is forfeited, cancelled, exercised, settled in cash, or otherwise terminates or expires without the actual delivery of common units, the common units subject to such award will again be available for awards under the 2021 LTIP. The 2021 LTIP provides for the grant of unit options, unit appreciation rights, restricted units, phantom units, other unit - based awards, cash awards, and a unit award or a substitute award to employees and directors of the Partnership and its general partner. The Board awards phantom units (the “Awards”) to the Partnership’s executive officers under the WES LTIPs. The Awards include (i) an award of time-vested phantom units that vest ratably over a period of three years (“Time-Based Awards”), (ii) a market-based award that vests after a performance period of three years based on the Partnership’s relative total unitholder return as compared to a group of peer companies (“TUR Awards”), and (iii) a performance award that vests based on the Partnership’s average return on assets over a performance period of three years (“ROA Awards”). At vesting, the number of vested units for the TUR Awards and the ROA Awards will be determined in accordance with the terms of the respective award agreements that provide for payout percentages ranging from 0 % to 200 % based on results achieved over the applicable performance period. At vesting, the Awards generally will be settled in Partnership common units. Prior to vesting, the Awards granted in 2020 pay in-kind distributions in the form of Partnership common units. During the years ended December 31, 2022, 2021, and 2020, the Partnership issued 13,754 , 21,681 , and 48,070 common units, respectively, as in-kind distributions under such Awards. Prior to vesting, the Time-Based Awards granted in 2021 and 2022 pay distribution equivalents in cash ratably. The TUR and ROA Awards granted in 2021 and 2022 pay cash distributions at vesting based on actual performance. In addition, time-vested phantom units may be awarded under the WES LTIPs to non-executive employees and outside directors of the Partnership, which vest ratably over a period of three years and one year from the grant date, respectively. Prior to vesting, the awards to non-executive employees and outside directors pay distribution equivalents in cash. The equity-based compensation expense attributable to these awards is amortized over the vesting periods applicable to the awards using the straight-line method. Expense is recognized based on the grant-date fair value and recorded, net of actual forfeitures, as General and administrative expense in the consolidated statements of operations. The fair value of the Time-Based Awards and non-executive awards is based on the observable market price of the Partnership’s units on the grant date of the award. The fair value of the TUR Awards is determined using a Monte Carlo simulation at the grant date of the award. The fair value of the ROA Awards is based on the observable market price of the Partnership’s units on the grant date of the award and compensation expense is adjusted quarterly based on the estimated performance rating at vesting. The total fair value of phantom units vested was $ 21.7 million, $ 8.5 million, and $ 0.5 million for the years ended December 31, 2022, 2021, and 2020, respectively, based on the market price at the vesting date. Compensation expense for the WES LTIPs was $ 25.5 million, $ 17.6 million, and $ 7.9 million for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, the Partnership had $ 27.8 million of estimated unrecognized compensation expense attributable to the WES LTIPs that will be recognized over a weighted-average period of 0.8 years. 145 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. EQUITY-BASED COMPENSATION The following table summarizes time-vested award activity under the WES LTIPs for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Non-vested units at beginning of year $ 16.97 1,775,672 $ 15.69 1,307,606 $ — — Granted 26.11 866,900 17.86 1,041,635 15.49 1,442,821 Vested 16.84 ( 793,367 ) 14.82 ( 497,648 ) 9.54 ( 53,551 ) Forfeited 21.12 ( 160,175 ) 16.83 ( 75,921 ) 16.27 ( 81,664 ) Non-vested units at end of year 21.33 1,689,030 16.97 1,775,672 15.69 1,307,606 The following table summarizes TUR Awards activity under the WES LTIPs for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Non-vested units at beginning of year $ 21.17 325,217 $ 17.79 108,481 $ — — Granted 37.80 94,173 22.77 237,720 17.79 124,067 Forfeited 28.54 ( 30,573 ) 21.78 ( 20,984 ) 17.79 ( 15,586 ) Non-vested units at end of year 24.62 388,817 21.17 325,217 17.79 108,481 The following table summarizes ROA Awards activity under the WES LTIPs for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Weighted-Average Grant-Date Fair Value Units Non-vested units at beginning of year $ 16.01 325,217 $ 16.27 108,481 $ — — Granted 25.95 94,173 15.88 237,720 16.27 124,067 Forfeited 19.74 ( 30,573 ) 15.96 ( 20,984 ) 16.27 ( 15,586 ) Non-vested units at end of year 18.12 388,817 16.01 325,217 16.27 108,481 146 Table of Contents WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. 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 December 31, 2022 and 2021, the consolidated balance sheets included $ 7.4 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. Management regularly monitors the remediation and reclamation process and the liabilities recorded and believes its environmental obligations are adequate to fund remedial actions required to comply with present laws and regulations, and that the ultimate liability for these matters, if any, will not differ materially from recorded amounts nor materially affect the overall results of operations, cash flows, or financial condition. There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental issues will not be discovered. See Note 11 . 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 oil system, DBM water systems, and DJ Basin complex. 147 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.