Westlake Chemical Partners LP 10-Q

Item 1. Financial Statements WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2022 December 31, 2021 (in thousands of dollars, except unit amounts) ASSETS Current assets Cash and cash equivalents $ 19,468 $ 17,057 Receivable under the Investment Management Agreement—Westlake Corporation ("Westlake") 135,863 106,243 Accounts receivable, net—Westlake 98,399 142,791 Accounts receivable, net—third parties 24,675 5,825 Inventories 5,359 8,898 Prepaid expenses and other current assets 458 396 Total current assets 284,222 281,210 Property, plant and equipment, net 1,006,633 1,043,539 Goodwill 5,814 5,814 Deferred charges and other assets, net 134,497 150,135 Total assets $ 1,431,166 $ 1,480,698 LIABILITIES Current liabilities Accounts payable—Westlake $ 35,583 $ 10,796 Accounts payable—third parties 19,459 35,105 Accrued and other liabilities 22,615 60,895 Total current liabilities 77,657 106,796 Long-term debt payable to Westlake 399,674 399,674 Deferred income taxes 1,671 1,530 Total liabilities 479,002 508,000 Commitments and contingencies (Note 12) EQUITY Common unitholders—publicly and privately held ( 21,099,638 and 21,092,186 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 480,535 481,796 Common unitholder—Westlake ( 14,122,230 and 14,122,230 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively) 53,787 54,754 General partner—Westlake ( 242,572 ) ( 242,572 ) Total Westlake Chemical Partners LP partners' capital 291,750 293,978 Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo") 660,414 678,720 Total equity 952,164 972,698 Total liabilities and equity $ 1,431,166 $ 1,480,698 The accompanying notes are an integral part of the consolidated financial statements. 1 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands of dollars, except unit amounts and per unit data) Revenue Net sales—Westlake $ 364,273 $ 247,887 $ 1,020,042 $ 708,646 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 Cost of sales 324,629 218,038 947,073 589,746 Gross profit 90,494 75,928 279,235 294,656 Selling, general and administrative expenses 8,678 7,792 26,824 24,734 Income from operations 81,816 68,136 252,411 269,922 Other income (expense) Interest expense—Westlake ( 3,645 ) ( 2,190 ) ( 8,703 ) ( 6,650 ) Other income, net 618 24 683 52 Income before income taxes 78,789 65,970 244,391 263,324 Income tax provision (benefit) 484 ( 105 ) 822 333 Net income 78,305 66,075 243,569 262,991 Less: Net income attributable to noncontrolling interest in OpCo 63,548 53,285 196,180 209,956 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 14,757 $ 12,790 $ 47,389 $ 53,035 Net income per limited partner unit attributable to Westlake Chemical Partners LP per limited partner unit (basic and diluted) Common units $ 0.42 $ 0.36 $ 1.35 $ 1.51 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,096,317 21,087,746 21,093,578 21,081,379 Common units—Westlake 14,122,230 14,122,230 14,122,230 14,122,230 The accompanying notes are an integral part of the consolidated financial statements. 2 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders — Public and Privately Held Common Unitholder — Westlake General Partner — Westlake Noncontrolling Interests in OpCo Total (in thousands of dollars) Balance at December 31, 2021 $ 481,796 $ 54,754 $ ( 242,572 ) $ 678,720 $ 972,698 Net income 9,700 6,494 — 64,631 80,825 Quarterly distribution to unitholders ( 9,946 ) ( 6,657 ) — — ( 16,603 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 60,688 ) ( 60,688 ) Balance at March 31, 2022 $ 481,550 $ 54,591 $ ( 242,572 ) $ 682,663 $ 976,232 Net income 9,846 6,592 — 68,001 84,439 Quarterly distribution to unitholders ( 9,943 ) ( 6,657 ) — — ( 16,600 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 75,130 ) ( 75,130 ) Balance at June 30, 2022 $ 481,453 $ 54,526 $ ( 242,572 ) $ 675,534 $ 968,941 Net income 8,839 5,918 — 63,548 78,305 Units issued for vested phantom units 190 — — — 190 Quarterly distribution to unitholders ( 9,947 ) ( 6,657 ) — — ( 16,604 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 78,668 ) ( 78,668 ) Balance at September 30, 2022 $ 480,535 $ 53,787 $ ( 242,572 ) $ 660,414 $ 952,164 The accompanying notes are an integral part of the consolidated financial statements. 3 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders— Public and Privately Held Common Unitholder— Westlake General Partner— Westlake Noncontrolling Interests in OpCo Total (in thousands of dollars) Balance at December 31, 2020 $ 471,701 $ 48,270 $ ( 242,572 ) $ 637,738 $ 915,137 Net income 9,069 6,077 — 61,476 76,622 Quarterly distribution to unitholders ( 9,936 ) ( 6,657 ) — — ( 16,593 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 62,058 ) ( 62,058 ) Balance at March 31, 2021 $ 470,834 $ 47,690 $ ( 242,572 ) $ 637,156 $ 913,108 Net income 15,029 10,070 — 95,195 120,294 Units issued for vested phantom units 149 — — — 149 Quarterly distribution to unitholders ( 9,936 ) ( 6,657 ) — — ( 16,593 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 65,200 ) ( 65,200 ) Balance at June 30, 2021 $ 476,076 $ 51,103 $ ( 242,572 ) $ 667,151 $ 951,758 Net income 7,660 5,130 — 53,285 66,075 Units issued for vested phantom units 262 — — — 262 Quarterly distribution to unitholders ( 9,936 ) ( 6,657 ) — — ( 16,593 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 96,683 ) ( 96,683 ) Balance at September 30, 2021 $ 474,062 $ 49,576 $ ( 242,572 ) $ 623,753 $ 904,819 The accompanying notes are an integral part of the consolidated financial statements. 4 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2022 2021 (in thousands of dollars) Cash flows from operating activities Net income $ 243,569 $ 262,991 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 91,682 82,830 Loss from disposition of property, plant and equipment 4,388 1,763 Other losses, net 4,400 866 Changes in operating assets and liabilities Accounts receivable—third parties ( 23,109 ) ( 2,037 ) Net accounts receivable—Westlake 68,520 56,228 Inventories 3,539 ( 3,116 ) Prepaid expenses and other current assets ( 62 ) ( 174 ) Accounts payable—third parties ( 14,269 ) 2,689 Accrued and other liabilities ( 32,326 ) 3,690 Other, net ( 5,170 ) ( 19,153 ) Net cash provided by operating activities 341,162 386,577 Cash flows from investing activities Additions to property, plant and equipment ( 45,458 ) ( 38,490 ) Maturities of investments with Westlake under the Investment Management Agreement 247,000 203,000 Investments with Westlake under the Investment Management Agreement ( 276,000 ) ( 276,000 ) Other — 126 Net cash used for investing activities ( 74,458 ) ( 111,364 ) Cash flows from financing activities Quarterly distributions to noncontrolling interest retained in OpCo by Westlake ( 214,486 ) ( 223,941 ) Quarterly distributions to unitholders ( 49,807 ) ( 49,779 ) Net cash used for financing activities ( 264,293 ) ( 273,720 ) Net increase in cash and cash equivalents 2,411 1,493 Cash and cash equivalents at beginning of period 17,057 17,154 Cash and cash equivalents at end of period $ 19,468 $ 18,647 The accompanying notes are an integral part of the consolidated financial statements. 5 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 1. Description of Business and Basis of Presentation Description of Business Westlake Chemical Partners LP (the "Partnership") is a Delaware limited partnership formed in March 2014 to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, the Partnership completed its initial public offering (the "IPO") of 12,937,500 common units representing limited partner interests. In connection with the IPO, the Partnership acquired a 10.6 % limited partner interest in Westlake Chemical OpCo LP ("OpCo") and a 100 % interest in Westlake Chemical OpCo GP LLC ("OpCo GP"), which is the general partner of OpCo. OpCo owns three ethylene production facilities and one common carrier ethylene pipeline (collectively, the "Contributed Assets" ) . Since the IPO, the Partnership has periodically purchased additional limited partner interest in OpCo. Most recently, on March 29, 2019, the Partnership purchased an additional 4.5 % newly-issued limited partner interest in OpCo for approximately $ 201,445 , resulting in an aggregate 22.8 % limited partner interest in OpCo, effective January 1, 2019. The remaining 77.2 % limited partner interest in OpCo is owned by Westlake Corporation. Basis of Presentation The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Partnership included in the annual report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Form 10-K"), filed with the SEC on March 2, 2022. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Partnership for the fiscal year ended December 31, 2021. References to "Westlake" refer collectively to Westlake Corporation (formerly known as Westlake Chemical Corporation) and its subsidiaries, other than the Partnership, OpCo and OpCo GP. The Partnership holds a 22.8 % limited partner interest and the entire non-economic general partner interest in OpCo. The remaining 77.2 % limited partner interest in OpCo is owned directly by Westlake, which has no rights to direct the activities that most significantly impact the economic performance of OpCo. As a result of the fact that substantially all of OpCo's activities are conducted on behalf of Westlake, and the fact that OpCo exhibits disproportionality of voting rights to economic interest, OpCo was deemed to be a variable interest entity. The Partnership, through its ownership of OpCo's general partner, has the power to direct the activities that most significantly impact the economic performance of OpCo, and it also has the obligation or right to absorb losses or receive benefits from OpCo that could potentially be significant to OpCo. As such, the Partnership was determined to be OpCo's primary beneficiary and therefore consolidates OpCo's results of operations and financial position. Westlake's retained interest of 77.2 % is recorded as noncontrolling interest in the Partnership's consolidated financial statements. In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of September 30, 2022, its results of operations for the three and nine months ended September 30, 2022 and 2021 and the changes in its cash position for the nine months ended September 30, 2022 and 2021. Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2022 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates. 6 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 2. Accounts Receivable—Third Parties Accounts receivable—third parties consist of the following: September 30, 2022 December 31, 2021 Trade customers $ 28,985 $ 5,875 Allowance for credit losses ( 4,310 ) ( 50 ) Accounts receivable, net—third parties $ 24,675 $ 5,825 3. Inventories Inventories consist of the following: September 30, 2022 December 31, 2021 Finished products $ 4,405 $ 5,458 Feedstock, additives and chemicals 954 3,440 Inventories $ 5,359 $ 8,898 4. Property, Plant and Equipment Depreciation expense on property, plant and equipment of $ 23,368 and $ 23,010 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense on property, plant and equipment of $ 71,252 and $ 68,795 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively. 5. Deferred Charges and Other Assets Amortization expense on other assets of $ 6,023 and $ 3,576 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2022 and 2021, respectively. Amortization expense on other assets of $ 20,430 and $ 14,035 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively. 6. Distributions and Net Income Per Limited Partner Unit On October 31, 2022, the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended September 30, 2022 of $ 0.4714 per unit. This distribution is payable on November 28, 2022 to unitholders of record as of November 10, 2022. Distributions are declared subsequent to quarter end; therefore, the table below represents total cash distributions declared from earnings of the related periods pertaining to such distributions. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income attributable to the Partnership $ 14,757 $ 12,790 $ 47,389 $ 53,035 Less: Limited partners' distribution declared on common units 16,604 16,600 49,799 49,788 Net income in excess of distribution (Distribution in excess of net income) $ ( 1,847 ) $ ( 3,810 ) $ ( 2,410 ) $ 3,247 7 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Net income per unit applicable to common limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units outstanding for the period. Because the Partnership has more than one class of participating securities, it uses the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units and incentive distribution rights. Net income attributable to the Partnership is allocated to the unitholders in accordance with their respective ownership percentages in preparation of the consolidated statements of changes in equity. However, when distributions related to the incentive distribution rights are made, net income equal to the amount of those distributions is first allocated to the general partner before the remaining net income is allocated to the unitholders based on their respective ownership percentages. Basic and diluted net income per unit is the same because the Partnership does not have any potentially dilutive units outstanding for the periods presented. Three Months Ended September 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,604 $ — $ 16,604 Distribution in excess of net income ( 1,847 ) — ( 1,847 ) Net income $ 14,757 $ — $ 14,757 Weighted average units outstanding: Basic and diluted 35,218,547 35,218,547 Net income per limited partner unit: Basic and diluted $ 0.42 Three Months Ended September 30, 2021 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,600 $ — $ 16,600 Distribution in excess of net income ( 3,810 ) — ( 3,810 ) Net income $ 12,790 $ — $ 12,790 Weighted average units outstanding: Basic and diluted 35,209,976 35,209,976 Net income per limited partner unit: Basic and diluted $ 0.36 Nine Months Ended September 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 49,799 $ — $ 49,799 Distribution in excess of net income ( 2,410 ) — ( 2,410 ) Net income $ 47,389 $ — $ 47,389 Weighted average units outstanding: Basic and diluted 35,215,808 35,215,808 Net income per limited partner unit: Basic and diluted $ 1.35 8 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Nine Months Ended September 30, 2021 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 49,788 $ — $ 49,788 Net income in excess of distribution 3,247 — 3,247 Net income $ 53,035 $ — $ 53,035 Weighted average units outstanding: Basic and diluted 35,203,609 35,203,609 Net income per limited partner unit: Basic and diluted $ 1.51 The amended Partnership Agreement provides that the Partnership will distribute cash that is deemed to be operating surplus each quarter to all the unitholders, pro rata, until each unit has received a distribution of $ 1.2938 . If cash distributions to the Partnership's unitholders exceed $ 1.2938 per common unit in any quarter, the Partnership's unitholders and Westlake, as the holder of the Partnership's incentive distribution rights, will receive distributions according to the following percentage allocations: Marginal Percentage Interest in Distributions Total Quarterly Distribution Per Unit Unitholders IDR Holders Above $ 1.2938 up to $ 1.4063 85.0 % 15.0 % Above $ 1.4063 up to $ 1.6875 75.0 % 25.0 % Above $ 1.6875 50.0 % 50.0 % The Partnership's distribution for the three months ended September 30, 2022 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights. Distribution Per Common Unit Distributions per common unit for the three and nine months ended September 30, 2022 and 2021 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Distributions per common unit $ 0.4714 $ 0.4714 $ 1.4142 $ 1.4142 7. Partners' Equity On October 4, 2018, the Partnership and Westlake Chemical Partners GP LLC, the general partner of the Partnership, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell the Partnership's common units, from time to time, up to an aggregate offering amount of $ 50,000 . The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units were issued under this program as of September 30, 2022. On March 29, 2019, the Partnership completed the issuance and sale of 2,940,818 common units at a price of $ 21.40 per unit through a private placement. TTWF LP, Westlake's principal stockholder and a related party, acquired 1,401,869 common units out of 2,940,818 common units issued in the private placement. 9 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 8. Related Party Transactions The Partnership and OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties. Sales to Related Parties OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, the Partnership and OpCo from time to time provide other services or products for which it charges Westlake a fee. Sales to related parties were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net sales—Westlake $ 364,273 $ 247,887 $ 1,020,042 $ 708,646 As of September 30, 2022, OpCo has estimated an annual deficiency for the full year 2022, and thus, the Partnership has recognized buyer deficiency fees of $ 13,940 during the three and nine months ended September 30, 2022. The buyer deficiency fee is measured based upon the lower of the actual production deficiency at period end or the estimated annual production deficiency. The buyer deficiency fees are classified as a component of net sales—Westlake. Cost of Sales from Related Parties Charges for goods and services purchased by the Partnership and OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement. Charges from related parties in cost of sales were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Feedstock purchased from Westlake and included in cost of sales $ 201,044 $ 119,000 $ 603,243 $ 302,095 Other charges from Westlake and included in cost of sales 49,144 35,615 135,574 94,923 Total $ 250,188 $ 154,615 $ 738,817 $ 397,018 10 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Services from Related Parties Included in Selling, General and Administrative Expenses Charges for services purchased by the Partnership from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of the Partnership under the Omnibus Agreement, including the Partnership's finance, legal, information technology, human resources, communication, ethics and compliance and other administrative functions. Charges from related parties included within selling, general and administrative expenses were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Services received from Westlake and included in selling, general and administrative expenses $ 7,080 $ 6,925 $ 20,510 $ 21,837 Goods and Services from Related Parties Capitalized as Assets Charges for goods and services purchased by the Partnership and OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement. Charges from related parties for goods and services capitalized as assets were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Goods and services purchased from Westlake and capitalized as assets $ 832 $ 3,606 $ 2,205 $ 4,542 Receivable under the Investment Management Agreement On August 1, 2017, the Partnership, OpCo and Westlake executed an investment management agreement (the "Investment Management Agreement") that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months. 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. Accrued interest of $ 691 and $ 71 was included in the receivable under the Investment Management Agreement balance at September 30, 2022 and December 31, 2021, respectively. Total interest earned related to the Investment Management Agreement was $ 691 and $ 81 for the three months ended September 30, 2022 and 2021, respectively, and $ 934 and $ 225 for the nine months ended September 30, 2022 and 2021, respectively. The Partnership's receivable under the Investment Management Agreement was as follows: September 30, 2022 December 31, 2021 Receivable under the Investment Management Agreement $ 135,863 $ 106,243 11 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Accounts Receivable from Related Parties The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee and shortfall fee recognized under the Ethylene Sales Agreement. The buyer deficiency fees discussed above under "Sales to Related Parties" recognized in the nine months ended September 30, 2022 are scheduled to be received by the Partnership after December 31, 2022. As a result of the force majeure events in 2021, the Partnership recognized revenue for a buyer deficiency fee of $ 51,395 and a shortfall fee of $ 58,906 during 2021. The buyer deficiency fee was collected from Westlake in January 2022 and the shortfall fee recognized in 2021 is recoverable during 2022 per the Ethylene Sales Agreement. The Partnership's accounts receivable from Westlake were as follows: September 30, 2022 December 31, 2021 Accounts receivable—Westlake $ 98,399 $ 142,791 Accounts Payable to Related Parties The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement. The Partnership's accounts payable to Westlake were as follows: September 30, 2022 December 31, 2021 Accounts payable—Westlake $ 35,583 $ 10,796 Related Party Leases OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail car leases and land. Operating lease rentals paid to Westlake for such leases were $ 719 and $ 997 for the three months ended September 30, 2022 and 2021, respectively, and $ 1,979 and $ 2,292 for the nine months ended September 30, 2022 and 2021, respectively, and reflected in other charges from Westlake that are included in cost of sales. OpCo has two site lease agreements with Westlake, each of which has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year. 12 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Debt Payable to Related Parties See Note 9 for a description of related party debt payable balances. Interest on related party debt payable balances for the three months ended September 30, 2022 and 2021 was $ 3,645 and $ 2,190 , respectively. Interest on related party debt payable balances for the nine months ended September 30, 2022 and 2021 was $ 8,703 and $ 6,650 , respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At September 30, 2022 and December 31, 2021, accrued interest on related party debt was $ 3,544 and $ 2,176 , respectively, and is reflected as a component of accrued and other liabilities in the consolidated balance sheets. Debt payable to related parties was as follows: September 30, 2022 December 31, 2021 Total debt payable to Westlake $ 399,674 $ 399,674 Major Customer and Concentration of Credit Risk During the three months ended September 30, 2022 and 2021, Westlake accounted for approximately 87.8 % and 84.3 %, respectively, of the Partnership's net sales. During the nine months ended September 30, 2022 and 2021, Westlake accounted for approximately 83.2 % and 80.1 %, respectively, of the Partnership's net sales. 13 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 9. Long-Term Debt Payable to Westlake Long-term debt payable to Westlake consists of the following: September 30, 2022 December 31, 2021 OpCo Revolver $ 22,619 $ 22,619 MLP Revolver 377,055 377,055 Total debt $ 399,674 $ 399,674 On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the Amended and Restated Senior Unsecured Revolving Credit Agreement (as so amended, the "OpCo Revolver"). Prior to the OpCo Revolver Amendment, the OpCo Revolver bore interest at the London Interbank Offered Rate ("LIBOR") plus 2.0 %. The OpCo Revolver Amendment, among other things, extended the maturity date of the OpCo Revolver from September 25, 2023 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 bore interest at SOFR plus the Applicable Margin and credit spread adjustment. On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the Senior Unsecured Revolving Credit Agreement (the "MLP Revolver"). Prior to the MLP Revolver Amendment, the MLP Revolver bore interest at a variable rate of either (a) LIBOR plus 2.0 % or, if LIBOR were no longer available, (b) the Alternate Base Rate plus 1.0 %. The MLP Revolver Amendment, among other things, extended the maturity date of the MLP Revolver from March 19, 2023 to July 12, 2027 and provided for the replacement of LIBOR with SOFR. 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. As of September 30, 2022, outstanding borrowings under the MLP Revolver bore interest at SOFR plus the Applicable Margin and credit spread adjustment. The weighted average interest rate on all debt was 3.4 % and 2.1 % at September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022, the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver. 10. Fair Value Measurements The Partnership reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. 14 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) The Partnership has financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and debt payable to Westlake, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Partnership's debt at September 30, 2022 and December 31, 2021 are summarized in the table below. The Partnership's debt includes the OpCo Revolver and the MLP Revolver at September 30, 2022. The fair value of debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology. Because the Partnership's valuation methodology used for debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of the Partnership's debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of the Partnership's debt include the selection of an appropriate discount rate. September 30, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value OpCo Revolver $ 22,619 $ 23,169 $ 22,619 $ 23,276 MLP Revolver 377,055 382,278 377,055 383,574 11. Supplemental Information Accrued and Other Liabilities Accrued and other liabilities were $ 22,615 and $ 60,895 at September 30, 2022 and December 31, 2021, respectively. Accrued maintenance expense and accrued taxes, which are components of accrued and other liabilities, were $ 6,128 and $ 5,462 , respectively, at September 30, 2022 and $ 5,597 and $ 2,264 , respectively, at December 31, 2021. No other component of accrued and other liabilities was more than five percent of total current liabilities. Non-cash Investing Activity Capital expenditure related liabilities, included in accounts payable—third parties and accrued and other liabilities, were $ 7,654 and $ 10,517 at September 30, 2022 and 2021, respectively. 12. Commitments and Contingencies The Partnership is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require the Partnership to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. These laws include the federal Clean Air Act, the federal Water Pollution Control Act, the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Toxic Substances Control Act and various other federal, state and local laws and regulations. Under CERCLA, an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because the Partnership's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Partnership. Westlake will indemnify the Partnership for liabilities that occurred or existed prior to August 4, 2014. On September 27, 2021, shortly after the turnaround on Petro 2 commenced, there was a flash fire at the quench tower of the Petro 2 facility. Several contractors working on the quench tower were injured. There are lawsuits pending in connection with the flash fire. We expect insurance to cover most of the costs associated with these lawsuits. The Partnership is also involved in other legal proceedings incidental to the conduct of its business. The Partnership does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows. 15 Table of Contents