What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-03 · 88 added, 79 removed, 230 unchanged (42% of the section changed)

24 unchanged sentences

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured on an annual basis, is not reduced for a force majeure event lasting fewer than 45 consecutive days.

In the event of a force majeure event, we recognize buyer deficiency fees representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure.

In the event Westlake purchases less than its annual commitment, we recognize buyer deficiency fees representing fixed margin and all expenses and expenditures incurred per pound of volume committed but not taken by Westlake.

Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year.

42 unchanged sentences

The MLP Revolver Amendment, among other things, extended the maturity date of the MLP Revolver to July 12, 2027 and provided for the replacement of LIBOR with SOFR.

Borrowings under the MLP Revolver will now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%.

Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%.

The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio.

Results of Operations

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Net sales—Westlake $ 364,273 $ 247,887 $ 1,020,042 $ 708,646

Net co-product, ethylene and other sales—third parties

83,673 81,273 155,416 129,677

Net co-products, ethylene and other sales—third parties 50,850 46,079 206,266 175,756

Total net sales 415,123 293,966 1,226,308 884,402

7 unchanged sentences

Income before income taxes 78,789 65,970 244,391 263,324

Income tax provision 175 263 338 438

Income tax provision (benefit) 484 (105) 822 333

Net income 78,305 66,075 243,569 262,991

8 unchanged sentences

(2) See "Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities" below.

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Sales Price Volume Average

2 unchanged sentences

+24.5 % +13.4 % +28.4 % +12.1 %

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Domestic US prices percentage change from prior-year period for fuel cost and feedstock

Fuel cost (Natural Gas) +102.8 % +107.1 %

Feedstock (Ethane) +58.0 % +81.7 %

Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating Activities

The following table presents reconciliations of MLP distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Net cash provided by operating activities $ 115,495 $ 99,459 $ 341,162 $ 386,577

Loss from disposition of fixed assets (460) (32) (3,430) (1,391)

Loss from disposition of property, plant and equipment (958) (372) (4,388) (1,763)

Changes in operating assets and liabilities and other (36,232) (33,012) (93,205) (121,823)

8 unchanged sentences

The following table presents reconciliations of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Net cash provided by operating activities $ 115,495 $ 99,459 $ 341,162 $ 386,577

Loss from disposition of fixed assets (460) (32) (3,430) (1,391)

Loss from disposition of property, plant and equipment (958) (372) (4,388) (1,763)

Changes in operating assets and liabilities and other (36,232) (33,012) (93,205) (121,823)

2 unchanged sentences

Interest expense (3,645) (2,190) (8,703) (6,650)

Provision for income taxes (175) (263) (338) (438)

Income tax benefit (provision) (484) 105 (822) (333)

Income from operations 81,816 68,136 252,411 269,922

2 unchanged sentences

EBITDA $ 111,825 $ 94,746 $ 344,776 $ 352,804

For the quarter ended June 30, 2022, net income was $84.4 million on net sales of $448.8 million.

This represents a decrease in net income of $35.9 million as compared to net income of $120.3 million on net sales of $322.2 million for the quarter ended June 30, 2021.

Net income attributable to the Partnership for the second quarter of 2022 was $16.4 million as compared to $25.1 million for the second quarter of 2021, a decrease of $8.7 million.

Income from operations was $87.4 million for the second quarter of 2022 as compared to $122.8 million for the second quarter of 2021.

Net income, net income attributable to the Partnership and operating income for the second quarter of 2022 as compared to the second quarter of 2021 were lower primarily due to a decrease in ethylene sales prices and volumes to third parties, higher ethane feedstock and natural gas costs, and the buyer deficiency fee and Shortfall recognized during the second quarter of 2021, partially offset by increased ethylene sales volumes and prices to Westlake per the terms of the Ethylene Sales Agreement and higher co-products sales prices and volumes.

Net sales for the second quarter of 2022 increased by $126.6 million as compared to net sales for the second quarter of 2021, mainly due to higher production during the second quarter of 2022 resulting in higher sales volumes and prices for co-products sales and ethylene sold to Westlake, partially offset by lower ethylene sales prices and volumes to third parties and the buyer deficiency fee and Shortfall recognized during the second quarter of 2021.

For the six months ended June 30, 2022, net income was $165.3 million on net sales of $811.2 million.

This represents a decrease in net income of $31.6 million as compared to net income of $196.9 million on net sales of $590.4 million for the six months ended June 30, 2021.

Net income attributable to the Partnership for the six months ended June 30, 2022 was $32.6 million as compared to $40.2 million for the six months ended June 30, 2021, a decrease of $7.6 million.

Income from operations was $170.6 million for the six months ended June 30, 2022 as compared to $201.8 million for the six months ended June 30, 2021.

Net income, net income attributable to the Partnership and operating income for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 were lower primarily due to increased ethane feedstock and natural gas costs as well as lower sales volumes and prices to third parties and the buyer deficiency fee and Shortfall recognized during the six months ended June 30, 2021, partially offset by higher sales prices to Westlake per the terms of the Ethylene Sales Agreement and higher co-product sales prices and volumes.

Net sales for the six months ended June 30, 2022 increased by $220.8 million as compared to net sales for the six months ended June 30, 2021, mainly due to higher co-product sales prices and volumes and higher sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower sales prices and volumes to third parties and the buyer deficiency fee and Shortfall recognized during the six months ended June 30, 2021.

For the quarter ended September 30, 2022, net income was $78.3 million on net sales of $415.1 million.

This represents an increase in net income of $12.2 million as compared to net income of $66.1 million on net sales of $294.0 million for the quarter ended September 30, 2021.

Net income attributable to the Partnership for the third quarter of 2022 was $14.8 million as compared to $12.8 million for the third quarter of 2021, an increase of $2.0 million.

Income from operations was $81.8 million for the third quarter of 2022 as compared to $68.1 million for the third quarter of 2021.

Net income, net income attributable to the Partnership and operating income for the third quarter of 2022 as compared to the third quarter of 2021 were higher primarily due to higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, higher co-products sales prices and volumes, and a buyer deficiency fee of $13.9 million recognized during the third quarter of 2022 resulting from lower planned ethylene offtake by Westlake, partially offset by higher ethane feedstock costs and natural gas prices.

Net sales for the third quarter of 2022 increased by $121.1 million as compared to net sales for the third quarter of 2021, mainly due to higher production during the third quarter of 2022 following the Petro 2 turnaround activities that occurred in the third quarter of 2021, resulting in higher sales volumes for co-products and ethylene sold to Westlake, higher ethylene sales prices to Westlake, and the $13.9 million buyer deficiency fee recognized during the third quarter of 2022.

For the nine months ended September 30, 2022, net income was $243.6 million on net sales of $1,226.3 million.

This represents a decrease in net income of $19.4 million as compared to net income of $263.0 million on net sales of $884.4 million for the nine months ended September 30, 2021.

Net income attributable to the Partnership for the nine months ended September 30, 2022 was $47.4 million as compared to $53.0 million for the nine months ended September 30, 2021, a decrease of $5.6 million.

Income from operations was $252.4 million for the nine months ended September 30, 2022 as compared to $269.9 million for the nine months ended September 30, 2021.

Net income, net income attributable to the Partnership and operating income for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 were lower primarily due to increased ethane feedstock costs and natural gas prices and lower ethylene sales prices and volumes to third parties, partially offset by higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement and higher co-products sales prices and volumes.

A buyer deficiency fee of $13.9 million was recognized in the nine months ended September 30, 2022 as compared to a buyer deficiency and Shortfall of $21.5 million in the nine months ended September 30, 2021.

Net sales for the nine months ended September 30, 2022 increased by $341.9 million as compared to net sales for the nine months ended September 30, 2021, mainly due to higher co-products sales prices and volumes and higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower ethylene sales prices and volumes to third parties and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021 as compared to the buyer deficiency fee recognized during the nine months ended September 30, 2022.

RESULTS OF OPERATIONS

Second Quarter 2022 Compared with Second Quarter 2021

Total net sales increased by $126.6 million, or 39.3%, to $448.8 million in the second quarter of 2022 from $322.2 million in the second quarter of 2021.

The increase in net sales in the second quarter of 2022 was primarily due to higher sales prices and volumes for ethylene sold to Westlake and co-products driven by increased production during the second quarter of 2022 compared to the second quarter of 2021.

The average sales price in the second quarter of 2022 contributed to a 37.7% increase in net sales, primarily due to higher ethylene sales prices to Westlake per the terms of the Ethylene Sales Agreement and co-product sales prices, partially offset by lower sales prices to third parties.

The average sales volume in the second quarter of 2022 contributed to a 5.5% increase in net sales, primarily due to higher production resulting in increased sales volumes to Westlake and increased co-product sales volumes, partially offset by decreased sales volumes to third parties as compared to the second quarter of 2021.

Third Quarter 2022 Compared with Third Quarter 2021

Total net sales increased by $121.1 million, or 41.2%, to $415.1 million in the third quarter of 2022 from $294.0 million in the third quarter of 2021.

The increase in net sales in the third quarter of 2022 was primarily due to higher sales prices and volumes for ethylene sold to Westlake and co-products driven by increased production during the third quarter of 2022 compared to the third quarter of 2021 due to the Petro 2 turnaround activities that occurred in the third quarter of 2021 and the buyer deficiency fee recognized during the third quarter of 2022.

The average sales price in the third quarter of 2022 increased by 24.5%, primarily due to higher ethylene sales prices to Westlake and co-products sales prices.

The average sales volume in the third quarter of 2022 increased by 13.4%, primarily due to higher production resulting in increased sales volumes to Westlake and increased co-products sales volumes as compared to the third quarter of 2021.

Gross Profit.

Gross profit decreased to $97.3 million for the second quarter of 2022 from $131.0 million for the second quarter of 2021.

The gross profit margin in the second quarter of 2022 was 21.7%, as compared to 40.7% for the second quarter of 2021.

The decrease in gross profit was primarily due to lower ethylene sales prices and volumes to third parties and the buyer deficiency fee and Shortfall totaling $8.7 million recognized during the second quarter of 2021, partially offset by higher ethylene sales prices and volumes sold to Westlake and higher co-product sales prices and volumes in the second quarter of 2022 compared to the second quarter of 2021 .

The second quarter 2022 gross profit margin was lower than the second quarter 2021 mainly due to higher ethane feedstock and natural gas costs, lower third party ethylene sales prices, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the second quarter of 2022.

Gross profit increased to $90.5 million in the third quarter of 2022 from $75.9 million in the third quarter of 2021.

The gross profit margin in the third quarter of 2022 was 21.8%, as compared to 25.8% for the third quarter of 2021.

The increase in gross profit was primarily due to higher ethylene sales prices and volumes sold to Westlake and higher co-products sales prices and volumes in the third quarter of 2022 compared to the third quarter of 2021, partially offset by higher ethane feedstock costs and natural gas prices.

The third quarter 2022 gross profit margin was lower than the third quarter of 2021 mainly due to higher ethane feedstock costs and natural gas prices, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the third quarter of 2022.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased by $1.6 million, or 19.3%, to $9.9 million in the second quarter of 2022 as compared to $8.3 million in the second quarter of 2021.

The increase in the second quarter of 2022 was mainly attributable to an increase in provision for doubtful accounts as compared to the second quarter of 2021.

Selling, general and administrative expenses increased by $0.9 million, or 11.5%, to $8.7 million in the third quarter of 2022 as compared to $7.8 million in the third quarter of 2021.

The increase in the third quarter of 2022 was mainly attributable to an increase in the provision for doubtful accounts as compared to the third quarter of 2021.

Interest Expense.

Interest expense of $2.9 million in the second quarter of 2022 increased from $2.2 million in the second quarter 2021 due to a higher average interest rate on debt compared to the second quarter of 2021.

Interest expense of $3.6 million in the third quarter of 2022 increased from $2.2 million in the third quarter 2021 due to a higher average interest rate on debt compared to the third quarter of 2021.

MLP Distributable Cash Flow.

MLP distributable cash flow decreased by $5.9 million to $19.6 million in the second quarter of 2022 from $25.5 million in the second quarter of 2021.

The decrease in the second quarter of 2022, as compared to the prior-year period, was primarily attributable to the decreased earnings at OpCo, partially offset by decreased turnaround reserves and maintenance expense.

EBITDA decreased by $33.0 million to $118.5 million in the second quarter of 2022 from $151.5 million in the second quarter of 2021.

The decrease was primarily due to lower third party ethylene sales prices, higher ethane feedstock and natural gas costs, and the buyer deficiency fee and Shortfall recognized during the second quarter of 2021, partially offset by higher sales volumes and prices for co-products and for ethylene sold to Westlake.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Total net sales increased by $220.8 million, or 37.4%, to $811.2 million in the six months ended June 30, 2022 from $590.4 million in the six months ended June 30, 2021.

The increase in net sales in the six months ended June 30, 2022 was primarily due to higher co-product sales prices and volumes, and higher sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower sales volumes and prices to third parties during the six months ended June 30, 2022 and the buyer deficiency fee and Shortfall recognized during the six months ended June 30, 2021.

The average sales price in the six months ended June 30, 2022 contributed to a 30.3% increase in net sales, primarily due to higher co-product and ethylene sales prices to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower sales prices to third parties.

The higher sales volume contributed to a 11.5% increase in net sales in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The increase in sales volumes for the six months ended June 30, 2022 was primarily due to increased co-product and ethylene sales volumes to Westlake, partially offset by lower sales volumes to third parties.

MLP distributable cash flow increased by $3.7 million to $16.7 million in the third quarter of 2022 from $13.0 million in the third quarter of 2021.

The increase in the third quarter of 2022, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo, as well as decreased turnaround reserves and maintenance expense.

EBITDA increased by $17.1 million to $111.8 million in the third quarter of 2022 from $94.7 million in the third quarter of 2021.

The increase was primarily due to higher ethylene sales prices and volumes sold to Westlake, higher co-products sales prices and volumes and the buyer deficiency fee recognized during the third quarter of 2022, partially offset by higher ethane feedstock costs and natural gas prices.

Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

Total net sales increased by $341.9 million, or 38.7%, to $1,226.3 million in the nine months ended September 30, 2022 from $884.4 million in the nine months ended September 30, 2021.

The increase in net sales in the nine months ended September 30, 2022 was primarily due to higher co-products sales prices and volumes and higher ethylene sales prices and volumes to Westlake, partially offset by lower ethylene sales prices and volumes to third parties.

In addition, the buyer deficiency fee of $13.9 million during the nine months ended September 30, 2022 was lower than the buyer deficiency fee and Shortfall of $21.5 million recognized during the nine months ended September 30, 2021.

The average sales price in the nine months ended September 30, 2022 increased by 28.4% compared to the nine months ended September 30, 2021, primarily due to higher co-products and ethylene sales prices to Westlake, partially offset by lower ethylene sales prices to third parties.

The average sales volume increased by 12.1% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The increase in sales volumes for the nine months ended September 30, 2022 was primarily due to higher production resulting in increased co-products and ethylene sales volumes to Westlake, partially offset by lower ethylene sales volumes to third parties.

Gross Profit.

Gross profit decreased to $188.7 million for the six months ended June 30, 2022 from $218.7 million for the six months ended June 30, 2021.

The gross profit margin in the six months ended June 30, 2022 was 23.3%, as compared to 37.0% for the six months ended June 30, 2021.

The six months ended June 30, 2022 gross profit margin was lower mainly due to increased ethane feedstock and natural gas costs, lower third party ethylene sales prices and the buyer deficiency fee and Shortfall totaling $18.4 million recognized during the six months ended June 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake compared to the six months ended June 30, 2021.

Gross profit decreased to $279.2 million for the nine months ended September 30, 2022 from $294.7 million for the nine months ended September 30, 2021.

The gross profit margin in the nine months ended September 30, 2022 was 22.8%, as compared to 33.3% for the nine months ended September 30, 2021.

The nine months ended September 30, 2022 gross profit margin was lower mainly due to increased ethane feedstock costs and natural gas prices, lower third party ethylene sales prices and volumes and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake compared to the nine months ended September 30, 2021.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses increased by $1.2 million, or 7.1%, to $18.1 million in the six months ended June 30, 2022 as compared to $16.9 million in the six months ended June 30, 2021.

The increase in the six months ended June 30, 2022 was mainly attributable to higher provision for doubtful accounts, partially offset by a decrease in service costs as compared to the six months ended June 30, 2021.

Selling, general and administrative expenses increased by $2.1 million, or 8.5%, to $26.8 million in the nine months ended September 30, 2022 as compared to $24.7 million in the nine months ended September 30, 2021.

The increase in the nine months ended September 30, 2022 was mainly attributable to a higher provision for doubtful accounts, partially offset by a decrease in service costs as compared to the nine months ended September 30, 2021.

Interest Expense.

Interest expense increased by $0.6 million to $5.1 million in the six months ended June 30, 2022 from $4.5 million in the six months ended June 30, 2021, largely due to a higher average interest rate on debt.

Interest expense increased by $2.0 million to $8.7 million in the nine months ended September 30, 2022 from $6.7 million in the nine months ended September 30, 2021, due to a higher average interest rate on debt.

MLP Distributable Cash Flow.

MLP distributable cash flow decreased by $2.9 million to $38.9 million in the six months ended June 30, 2022 from $41.8 million in the six months ended June 30, 2021.

The decrease in the six months ended June 30, 2022, as compared to the prior-year period, was primarily attributable to the lower earnings at OpCo, partially offset by decreased turnaround reserves and maintenance expense.

EBITDA decreased by $25.1 million to $233.0 million in the six months ended June 30, 2022 from $258.1 million in the six months ended June 30, 2021.

The decrease, as compared to the prior-year period, was primarily due to lower sales volumes and prices to third parties, higher ethane feedstock and natural gas costs, and the buyer deficiency fee and Shortfall recognized during the six months ended June 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the six months ended June 30, 2022.

CASH FLOW DISCUSSION FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

MLP distributable cash flow increased by $0.8 million to $55.6 million in the nine months ended September 30, 2022 from $54.8 million in the nine months ended September 30, 2021.

The increase in the nine months ended September 30, 2022, as compared to the prior-year period, was primarily attributable to decreased turnaround reserves and maintenance expense, partially offset by lower earnings at OpCo.

EBITDA decreased by $8.0 million to $344.8 million in the nine months ended September 30, 2022 from $352.8 million in the nine months ended September 30, 2021.

The decrease, as compared to the prior-year period, was primarily due to higher ethane feedstock costs and natural gas prices for third party sales, lower ethylene sales prices and volumes to third parties, and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the nine months ended September 30, 2022.

CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

Operating Activities

Operating activities provided cash of $225.7 million in the first six months of 2022 compared to cash provided by operating activities of $287.1 million in the first six months of 2021.

The $61.4 million decrease in cash flows from operating activities was mainly due to a decrease in cash used by working capital during the six months ended June 30, 2022 as compared to the prior-year period.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued liabilities, used cash of $6.1 million in the first six months of 2022 as compared to $35.0 million of cash provided in the first six months of 2021, resulting in an overall unfavorable change of $41.1 million.

The unfavorable change in working capital was mainly attributable to an unfavorable change in accounts payable and accrued and other liabilities due to the timing of payment of accruals related to the Petro 2 turnaround activities in 2021, as well as third party net accounts receivable due to higher sales in the six months ended June 30, 2022 since our Petro 2 turnaround in the second half of 2021.

These changes were partially offset by a favorable change in accounts receivable—Westlake due to the collection of the 2021 buyer deficiency fee and a portion of the 2021 Shortfall during the first six months of 2022.

Operating activities provided cash of $341.2 million in the first nine months of 2022 compared to cash provided by operating activities of $386.6 million in the first nine months of 2021.

The $45.4 million decrease in cash flows from operating activities was mainly due to a decrease in cash provided by working capital during the nine months ended September 30, 2022 as compared to the prior-year period.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $2.3 million in the first nine months of 2022 as compared to $57.3 million of cash provided in the first nine months of 2021, resulting in an overall unfavorable change of $55.0 million.

The unfavorable change in working capital was mainly attributable to an unfavorable change in accounts payable and accrued and other liabilities due to the timing of payment of accruals related to the Petro 2 turnaround activities in 2021, as well as accounts receivable—third parties due to higher sales in the nine months ended September 30, 2022 since our Petro 2 turnaround in the second half of 2021.

Investing Activities

Net cash used for investing activities during the first six months of 2022 was $55.3 million as compared to net cash used for investing activities of $126.2 million in the first six months of 2021, mainly due to decreased net cash used under the Investment Management Agreement, partially offset by increased capital expenditures in the first six months of 2022, as compared to the prior-year period.

Capital expenditures during the first six months of 2022 and 2021 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Net cash used for investing activities during the first nine months of 2022 was $74.5 million as compared to net cash used for investing activities of $111.4 million in the first nine months of 2021.

The $36.9 million decrease in net cash used for investing activities was mainly due to decreased net cash used under the Investment Management Agreement, partially offset by increased capital expenditures in the first nine months of 2022, as compared to the prior-year period.

Capital expenditures during the first nine months of 2022 and 2021 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Financing Activities

Net cash used for financing activities during the first six months of 2022 was $169.0 million as compared to net cash used for financing activities of $160.4 million in the first six months of 2021.

The outflows during the first six months of 2022 were related to the distributions of $135.8 million to Westlake and of $33.2 million to other unitholders by the Partnership.

The cash outflows during the first six months of 2021 were related to the distributions of $127.3 million to Westlake and of $33.2 million to other unitholders by the Partnership.

Net cash used for financing activities during the first nine months of 2022 was $264.3 million as compared to net cash used for financing activities of $273.7 million in the first nine months of 2021.

The outflows during the first nine months of 2022 were related to distributions of $214.5 million to Westlake and of $49.8 million to other unitholders by the Partnership.

The cash outflows during the first nine months of 2021 were related to distributions of $223.9 million to Westlake and of $49.8 million to other unitholders by the Partnership.

LIQUIDITY AND CAPITAL RESOURCES

2 unchanged sentences

The Partnership intends to use the net proceeds of sales of the common units, if any, for general partnership purposes, including the funding of potential drop-downs and other acquisitions.

No common units had been issued under the ATM Program as of June 30, 2022.

No common units had been issued under the ATM Program as of September 30, 2022.

Based on the terms of our cash distribution policy, we expect that we will distribute to our partners most of the excess cash generated by our operations.

9 unchanged sentences

Westlake's credit facility and various indentures do not prevent OpCo from making distributions to us.

On August 1, 2022, the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on August 25, 2022 to unitholders of record as of August 11, 2022, which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on June 30, 2022.

On October 31, 2022, the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on November 28, 2022 to unitholders of record as of November 10, 2022, which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on September 30, 2022.

We do not have a legal or contractual obligation to pay distributions on a quarterly basis or any other basis at our minimum quarterly distribution rate or any other rate.

1 unchanged sentence

Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins.

Total capital expenditures for the six months ended June 30, 2022 and 2021 were $32.3 million and $27.3 million, respectively.

No such funding was required by OpCo during the six months ended June 30, 2022 and 2021.

Total capital expenditures for the nine months ended September 30, 2022 and 2021 were $45.5 million and $38.5 million, respectively.

No such funding was required by OpCo during the nine months ended September 30, 2022 and 2021.

We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.

Cash and Cash Equivalents

As of June 30, 2022, our cash and cash equivalents totaled $18.4 million.

As of September 30, 2022, our cash and cash equivalents totaled $19.5 million.

In addition, we have cash invested under the Investment Management Agreement (as described below) and a revolving credit facility with Westlake available to supplement cash if needed, as described under "Indebtedness" below.

1 unchanged sentence

Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo.

The Partnership had $129.4 million of cash invested under the Investment Management Agreement at June 30, 2022.

The Partnership had $135.9 million of cash invested under the Investment Management Agreement at September 30, 2022.

OpCo Revolver

1 unchanged sentence

The OpCo Revolver is scheduled to mature on July 12, 2027.

As of June 30, 2022, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at the London Interbank Offered Rate ("LIBOR") plus 2.0%, which is accrued in arrears quarterly.

On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver.

The OpCo Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR").

The OpCo Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR").

Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%.

The Applicable Margin under the OpCo Revolver is 1.75%.

As of September 30, 2022, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.

In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake, as amended in August and November 2017, March 2020 and July 2022 (the "MLP Revolver").

The MLP Revolver has a borrowing capacity of $600.0 million and is scheduled to mature on July 12, 2027.

As of June 30, 2022, outstanding borrowings under the MLP Revolver totaled $377.1 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in arrears quarterly.

On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver.

The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR.

The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with the SOFR.

The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio.

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The repayment of borrowings under the MLP Revolver is subject to acceleration upon the occurrence of an event of default.

As of September 30, 2022, outstanding borrowings under the MLP Revolver totaled $377.1 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.

We intend to use the MLP Revolver to purchase additional limited partnership interests in OpCo in the future, in the event OpCo desires to sell such additional interests to us, for other acquisitions and for general corporate purposes.

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These statements are subject to a number of assumptions, risks and uncertainties, including those described under "Risk Factors" in the 2021 Form 10-K and the following:

• general economic and business conditions;

• general economic and business conditions, including inflation, interest rates and recession;

• the cyclical nature of the chemical industry;

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• uncertainties associated with pandemic infectious diseases, particularly COVID-19;

• uncertainties associated with climate change;

• the potential impact on demand for ethylene due to initiatives such as recycling and customers seeking alternatives to polymers;

• current and potential governmental regulatory actions in the United States and regulatory actions and political unrest in other countries, including environmental regulations;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis