What changed in this filing

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Item 1A. Risk Factors

2024-02-21 compared with 2023-02-22 · 51 added, 47 removed, 396 unchanged (20% of the section changed)

6 unchanged sentences

Important factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:

• our ability to pay distributions to our unitholders;

• our ability to pay distributions to our unitholders and the amount of such distributions;

• our assumptions about the energy market;

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

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

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

• weather and natural disasters;

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• our commitments to capital projects;

• our ability to access liquidity under the RCF;

• our ability to access liquidity under the RCF and commercial paper program;

• our ability to repay debt;

• the resolution of litigation or other disputes;

• conflicts of interest among us, our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs, and our future business opportunities;

• conflicts of interest among us and our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs, and our future business opportunities;

• our ability to maintain and/or obtain rights to operate our assets on land owned by third parties;

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We are dependent on Occidental as our largest customer and the owner of our general partner, and we expect to derive significant revenue from Occidental for the foreseeable future.

As a result, any event, whether in our area of operations or otherwise, that adversely affects Occidental’s production, financial condition, leverage, market reputation, liquidity, results of operations, or cash flows may adversely affect our revenues and cash available for distribution.

Accordingly, we are indirectly subject to the business risks of Occidental, including, but not limited to, the volatility of oil and natural-gas prices, the availability of capital on favorable terms to fund Occidental’s exploration and development activities, the political and economic uncertainties associated with Occidental’s foreign operations, transportation-capacity constraints, and shareholder activism.

12 unchanged sentences

As a result of these conflicts of interest, our general partner may favor the interests of Occidental or its owners or affiliates over the interest of our unitholders.

Our future prospects depend on Occidental’s growth strategy, midstream operational philosophy, and drilling program, including the level of drilling and completion activity by Occidental on acreage dedicated to us.

Additional conflicts also may arise in the future associated with future business opportunities that are pursued by Occidental and

Our future prospects depend, in part, on Occidental’s growth strategy, midstream operational philosophy, and drilling program, including the level of drilling and completion activity by Occidental on acreage dedicated to us.

Additional conflicts also may arise in the future associated with future business opportunities that are pursued by

Occidental and us.

For example, Occidental is not prohibited from owning assets or engaging in businesses that directly or indirectly compete with us.

1 unchanged sentence

Our costs of borrowing and ability to access the capital markets are affected by market conditions and the credit rating assigned to WES Operating’s debt by the major credit rating agencies.

Any future downgrades in WES Operating’s credit ratings could adversely affect WES Operating’s ability to issue debt in the public debt markets and negatively impact our cost of capital, future interest costs, and ability to effectively execute aspects of our business strategy.

Any future downgrades in WES Operating’s credit ratings could adversely affect WES Operating’s ability to issue debt, including commercial paper, in the public debt markets and negatively impact our cost of capital, future interest costs, and ability to effectively execute aspects of our business strategy.

For example, WES Operating currently has $2.8 billion of outstanding senior notes that provide for changes to the coupon rates following changes in WES Operating’s credit ratings.

26 unchanged sentences

Our profitability may be negatively impacted by inflation in the cost of labor, materials, and services.

Although inflation in the United States has been relatively low in recent years, the U.S.

economy currently is experiencing significant inflation relative to historical precedent from, among other things, supply-chain disruptions caused by, or governmental stimulus or fiscal policies adopted in response to, the COVID-19 crisis and in connection with the war in Ukraine.

More specifically, the bottlenecks and disruptions from the lingering effects of the COVID-19 crisis have caused difficulties within the U.S.

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

Continued inflation has raised our costs for labor, materials, fuel, and services, thereby increasing our operating costs and capital expenditures, and these costs may continue to increase.

While we cannot predict any future trends in the rate of inflation, the aforementioned factors have brought significant uncertainty to the near-term economic outlook.

Further increases in inflation would raise our costs for labor, materials, fuel, and services, and to the extent we are unable to recover higher costs through our commercial agreements, would negatively impact our profitability and cash flows available for distribution to unitholders.

Although inflation in the United States has declined during 2023, the prices of key inputs to the midstream industry have continued to be significantly impacted by inflation relative to historical levels.

This continued inflation has raised our costs for steel products, automation components, power supply, labor materials, fuel, chemicals, and services, thereby increasing our operating costs and capital expenditures, and these costs may continue to increase.

While we cannot predict any future trends in the rate of inflation, sustained or further increases in inflation would negatively impact our profitability and cash flows available for distribution to unitholders to the extent we are unable to recover such higher costs through our commercial agreements.

The amount of cash we have available for distribution to holders of our common units depends primarily on our cash flows rather than on our profitability, and we may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay distributions at previously announced levels to holders of our common units, or at all, even during periods in which we record net income.

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We are exposed to the credit risk of third-party customers, and any material non-payment or non-performance by these parties, including with respect to our gathering, processing, transportation, and disposal agreements, could reduce our ability to make distributions to our unitholders.

On some of our systems, we rely on third-party customers for substantially all of our revenues related to those assets.

Across our asset portfolio, we rely on third-party customers for a substantial amount of our revenues.

The loss of a portion or all of these customers’ contracted volumes, as a result of competition, creditworthiness, inability to negotiate extensions, replacements of contracts, or otherwise, could reduce our ability to make cash distributions to our unitholders.

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This legislation reforms oversight of oil and natural-gas exploration and production activities in the state.

The mission of the Colorado Oil and Gas Conservation Commission (“COGCC”) has changed from fostering energy development in the state to regulating the industry in a manner that is protective of public health and safety and the environment.

The mission of the Colorado Oil and Gas Conservation Commission, now renamed as the Energy & Carbon Management Commission (“ECMC”), has changed from fostering energy development in the state to regulating the industry in a manner that is protective of public health and safety and the environment.

The new legislation also authorizes Colorado cities and counties to assume an increased role in regulating oil and natural-gas operations within their jurisdictions in a manner that may be more stringent than state-level rules.

Effective January 15, 2021, COGCC began implementing the new Senate Bill 19-181 rules that include a unified permitting process, increased setbacks from schools, limitations on venting and flaring, enhanced wildlife protections, and, in conjunction with the Colorado Department of Public Health and Environment, requirements to evaluate the cumulative impacts of oil and gas operations.

Additional Senate Bill 19-181 rulemakings may be expected.

Effective January 15, 2021, the ECMC began implementing the new Senate Bill 19-181 rules that include a unified permitting process, increased setbacks from schools, limitations on venting and flaring, enhanced wildlife protections, and, in conjunction with the Colorado Department of Public Health and Environment, requirements to evaluate the cumulative impacts of oil and gas operations.

Since July 2019, the ECMC has conducted rulemaking hearings to adopt rules required in the bill, and adopted rules in 2019, 2020 and 2021 to implement the provisions of Senate Bill 19-181.

Rules adopted include those related to wellbore integrity, financial assurance, worker certification, and the like.

Operators are adjusting to the new requirements, but are experiencing delayed drilling permit issuance and potentially will face increased operating costs, which could have a material adverse effect on our customers in Colorado, which in turn could reduce statewide demand for our midstream services significantly.

15 unchanged sentences

Our business and operations are concentrated in a limited number of producing areas.

Due to our limited geographic diversification, adverse operational developments, regulatory or legislative changes, or other events in an area in which we have significant operations could have a greater impact on our business, results of operations, financial condition, and ability to make cash distributions to our unitholders than if our operations were more diversified.

financial condition, and ability to make cash distributions to our unitholders than if our operations were more diversified.

Our indebtedness may limit our ability to capitalize on acquisitions and other business opportunities or our flexibility to obtain financing.

The operating and financial restrictions and covenants in the indentures governing our publicly traded notes, (collectively, the “Notes”) or the RCF, and any future financing arrangements could restrict our ability to finance future operations or capital needs or to expand or pursue business activities associated with our subsidiaries and equity investments.

See Part II, Item 7 of this Form 10-K for a further discussion of the terms of the RCF and Notes.

The operating and financial restrictions and covenants in the indentures governing our publicly traded notes, (collectively, the “Notes”), the RCF, and any future financing arrangements could restrict our ability to finance future operations or capital needs or to expand or pursue business activities associated with our subsidiaries and equity investments.

See Part II, Item 7 of this Form 10-K for a further discussion of the terms of the RCF, Notes, and the commercial paper program.

Furthermore, our indebtedness and related debt-service costs could impair our ability to obtain additional financing, reduce funds available for operations and business opportunities, make us more vulnerable to competitive pressures or market downturns, and limit our financial and operational flexibility.

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We face various security threats, including cyber-threats to the security of our facilities and infrastructure, attempts to gain unauthorized access to sensitive information or to render data or systems unusable, and terrorist acts.

Additionally, destructive forms of protests by activists and other disruptions, including acts of sabotage or eco-terrorism, against oil and natural-gas-related activities could potentially result in damage or injury to persons, property, or the environment, or lead to extended interruptions of our or our customers’ operations.

Additionally, destructive forms of protests by activists and other disruptions, including acts of sabotage or eco-

terrorism, against oil and natural-gas-related activities could potentially result in damage or injury to persons, property, or the environment, or lead to extended interruptions of our or our customers’ operations.

Our implementation of procedures and controls to monitor and mitigate security threats and to increase security for our facilities, infrastructure, and information may result in increased costs.

13 unchanged sentences

Because we are a related party of Occidental, the assets we previously acquired from Anadarko were recorded at Anadarko’s carrying value prior to the transaction.

Accordingly, we may be at an increased risk for impairments because the initial book values of a substantial portion of our assets do not have a direct relationship with, and in some cases could be significantly higher than, the consideration paid to acquire such assets.

See the discussion of material impairments in Note 9—Property, Plant, and Equipment in the Notes to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K.

7 unchanged sentences

FERC, however, has not made any determinations with respect to the jurisdictional status of any of these gas-gathering systems.

The distinction between FERC-regulated transmission services and federally unregulated gathering services has been the subject of ongoing litigation and, over time, FERC policy concerning which activities it regulates and which activities are excluded from its regulation has changed.

its regulation has changed.

State regulation of gathering facilities generally includes various safety, environmental and, in some circumstances, nondiscriminatory take requirements and complaint-based rate regulation.

22 unchanged sentences

In practice, because states can adopt stricter standards for intrastate pipelines than those imposed by the federal government for interstate lines, states vary considerably in their authority and capacity to address pipeline safety.

Moreover, PHMSA and one or more state regulators, including the Texas Railroad Commission, have expanded the scope of their regulatory inspections in recent years to include certain in-plant equipment and pipelines found within NGLs fractionation facilities and associated storage facilities, to assess compliance with hazardous liquids pipeline safety requirements.

Moreover, PHMSA and one or more state regulators, including the Texas Railroad Commission, have expanded the scope of their regulatory inspections in recent years to include certain in-plant

equipment and pipelines found within NGLs fractionation facilities and associated storage facilities, to assess compliance with hazardous liquids pipeline safety requirements.

To the extent that PHMSA and/or state regulatory agencies are successful in asserting their jurisdiction in this manner, midstream operators of NGLs fractionation facilities and associated storage facilities may be required to make operational changes or modifications at their facilities to meet standards beyond current OSHA and EPA requirements, where such changes or modifications may result in additional capital costs, possible operational delays, and increased costs of operation that, in some instances, may be significant.

2 unchanged sentences

Some portions of the pipeline systems that we operate were in service for many decades, prior to our purchase of these systems.

Consequently, there may be historical occurrences or latent issues regarding our pipeline systems that our executive management may be unaware of and that may have a material adverse effect on our business and results of operations.

Consequently, there may be historical occurrences or latent issues regarding our pipeline systems that we may be unaware of and that may have a material adverse effect on our business and results of operations.

The age or condition of our pipeline systems also could result in increased maintenance or repair expenditures, and any downtime associated with increased maintenance and repair activities could materially reduce our revenue.

In addition, we may be unable to complete maintenance or repairs due to the unavailability of necessary materials as a result of supply chain disruptions (including those caused by COVID-19 lockdowns or geopolitical events, such as the Russian invasion of Ukraine), which may result in the suspension of operations of the impacted assets until such activities can be completed.

In addition, we may be unable to complete maintenance or repairs due to the unavailability of necessary materials as a result of supply chain disruptions (including those caused by geopolitical events, such as the Russian invasion of Ukraine), which may result in the suspension of operations of the impacted assets until such activities can be completed.

Any significant increase in maintenance and repair expenditures, loss of revenue due to the age or condition of our pipeline systems, or delays in completing necessary maintenance or repairs could adversely affect our business and results of operations.

11 unchanged sentences

We may incur significant environmental costs and liabilities in connection with our operations due to our handling of natural gas, crude oil, NGLs, and other petroleum products, because of pollutants from our operations emitted into ambient air or discharged or released into surface water or groundwater, and as a result of historical industry operations and waste-disposal practices.

For example, an accidental release as a result of our operations could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by owners of the properties through which our gathering or transportation systems pass, neighboring landowners, and other third parties for personal injury, natural-resource and property damages, and fines or penalties for related violations of

environmental laws or regulations.

Joint and several strict liabilities may be incurred, without regard to fault, under certain of these environmental laws and regulations.

In addition, stricter laws, regulations, or enforcement policies could increase our operational or compliance costs and the costs of any restoration or remedial actions that may become necessary, which could have a material adverse effect on our results of operations or financial condition.

The adoption of any laws, regulations, or other legally enforceable mandates could increase our oil and natural-gas exploration and production customers’ operating and compliance costs and reduce the rate of production of oil or natural gas by operators with whom we have a business relationship, which could have a material adverse effect on our results of operations and cash flows.

operators with whom we have a business relationship, which could have a material adverse effect on our results of operations and cash flows.

Our construction of new assets is subject to regulatory, environmental, political, legal, and economic risks, which could adversely affect our results of operations and financial condition.

6 unchanged sentences

In addition, we could construct facilities to capture anticipated future growth in production in a region in which such growth does not materialize.

We may fail to successfully combine our business with the assets and business of Meritage, which could have an adverse impact on our future results.

The Meritage acquisition closed on October 13, 2023.

The integration of these acquired assets involve potential risks, including the failure to realize expected profitability, growth, or accretion;

environmental or regulatory compliance matters or liabilities;

diversion of management’s attention from our existing business;

and the incurrence of unanticipated liabilities and costs for which indemnification is unavailable or inadequate.

If any of the risks described above or other anticipated or unanticipated liabilities were to materialize, it could have an adverse effect on our business, financial condition, and results of operations.

We are subject to increased scrutiny from institutional investors with respect to our governance structure and the social cost of our industry, which may adversely impact our ability to raise capital from such investors.

11 unchanged sentences

Further, the other owners of our equity investments may establish reserves for working capital, capital projects, environmental matters, and legal proceedings, that would similarly reduce the amount of cash available for distribution.

Any of the above could impact our ability to make cash distributions to our unitholders adversely.

Any of the above could adversely impact our ability to make cash distributions to our unitholders.

Further, in connection with the acquisition of our membership interest in Chipeta, we became party to the Chipeta LLC agreement.

22 unchanged sentences

RISKS INHERENT IN AN INVESTMENT IN US

A reduction in Occidental’s ownership interest in us may reduce its incentive to support our operations.

As discussed in WES and WES Operating’s Relationship with Occidental Petroleum Corporation in Part I, Items 1 and 2 of this Form 10-K, we believe that one of our principal strengths is our affiliation with Occidental and that Occidental, through its significant economic interest in us, will continue to pursue projects that enhance the value of our business.

To the extent Occidental’s net interest in us declines through the sale of its holdings or otherwise, Occidental may be less incentivized to support the continued growth of our business.

Accordingly, a decrease in Occidental’s net holdings in us could have a material adverse effect on our business, results of operations, financial position, and ability to grow or make cash distributions to our unitholders.

Our general partner’s liability regarding our obligations is limited.

6 unchanged sentences

Our partnership agreement contains provisions that modify and reduce the fiduciary standards to which our general partner otherwise would be held by state fiduciary duty law.

For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, or otherwise free of fiduciary duties to us and our unitholders.

For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general

partner, or otherwise free of fiduciary duties to us and our unitholders.

This entitles our general partner only to consider the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates, or our limited partners.

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Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets.

Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the impermissible distribution amount.

law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the impermissible distribution amount.

Substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that were known to the substituted limited partner at the time it became a limited partner and for those obligations that were unknown if the liabilities could have been determined from the partnership agreement.

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federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative, or judicial interpretation at any time.

time, members of Congress have proposed and considered substantive changes to the existing U.S.

From time to time, members of Congress have proposed and considered substantive changes to the existing U.S.

federal income tax laws that would affect publicly traded partnerships, including elimination of partnership tax treatment for publicly traded partnerships.

Any modification to the U.S.

federal income tax laws and interpretations thereof may or may not be retroactively applied and could make it more difficult or impossible to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S.

federal income tax laws and interpretations thereof may or may not

be retroactively applied and could make it more difficult or impossible to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S.

federal income tax purposes or increase the amount of taxes payable by unitholders in publicly traded partnerships.

7 unchanged sentences

Moreover, the costs of any contest with the IRS will result in a reduction in cash available for distribution to our unitholders and thus will be borne indirectly by our unitholders.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

For tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.

If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.

To the extent possible under applicable rules, our general partner may pay such amounts directly to the IRS or, if we are eligible, elect to issue a revised Schedule K-1 to each unitholder with respect to an audited and adjusted return.

13 unchanged sentences

Investment in common units by tax-exempt entities, such as employee benefit plans, and individual retirement accounts (or “IRAs”) raises issues unique to them.

For example, virtually all of our income allocated to organizations

that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.

For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them.

Tax-exempt entities should consult a tax advisor before investing in our units.

36 unchanged sentences

unincorporated business taxes;

and estate, inheritance, or intangible taxes that are imposed by the various

jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions.

and estate, inheritance, or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those

jurisdictions.

Our unitholders likely will be required to file tax returns and pay taxes in some or all of these various jurisdictions, or be subject to penalties for failure to comply with those requirements.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors