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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-02 · 104 added, 116 removed, 282 unchanged (44% of the section changed)

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In connection with the IPO, we acquired a 10.6% interest in OpCo and a 100% interest in OpCo GP, which is the general partner of OpCo.

On April 29, 2015, we purchased an additional 2.7% newly-issued limited partner interest in OpCo, resulting in an aggregate 13.3% limited partner interest in OpCo effective as of April 1, 2015.

On September 29, 2017, we completed a secondary public offering of 5,175,000 common units and purchased an additional 5.0% newly-issued limited partner interest in OpCo, resulting in an aggregate 18.3% limited partner interest in OpCo effective as of July 1, 2017.

On April 29, 2015, we purchased an additional 2.7% newly-issued limited partner interest in OpCo, resulting in an aggregate 13.3% limited partner interest in OpCo effective April 1, 2015.

The 12,686,115 subordinated units of the Partnership, all of which were previously owned by Westlake, were converted into common units of the Partnership on August 30, 2017.

On March 29, 2019, we completed a private placement of 2,940,818 common units and used the net proceeds to purchase an additional 4.5% interest in OpCo, effective January 1, 2019, resulting in us owning an aggregate 22.8% limited partner interest in OpCo.

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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 event.

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

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.

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Net proceeds (after transportation and other costs) from the sales of associated co-products that result from the production of ethylene purchased by Westlake are netted against the ethylene price charged to Westlake under the Ethylene Sales Agreement, thereby substantially reducing our exposure to fluctuations in the market prices of these co-products.

During 2021, all the third-party ethylene and associated co-products sales generated 15.5% of our total revenues.

During 2022, all third-party ethylene and associated co-products sales generated 15.7% of our total revenues.

Under the Services and Secondment Agreement, OpCo uses a portion of its production capacity to process purge gas for Westlake.

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EBITDA has material limitations as a performance measure because it excludes interest expense, depreciation and amortization, and income taxes.

Reconciliations for each of MLP distributable cash flow and EBITDA are included in "—Results of Operations" below.

Reconciliations for each of MLP distributable cash flow and EBITDA are included in the "—Results of Operations" section below.

Factors Affecting Our Business

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Demand for ethylene exhibits cyclical commodity characteristics as margins earned on ethylene derivative products are influenced by changes in the balance between supply and demand, the resulting operating rates and general economic activity.

While we believe we have substantially mitigated our indirect exposure to commodity price fluctuations during the term of the Ethylene Sales Agreement through the minimum commitment and the cost-plus based pricing, our ability to execute our growth strategy in our areas of operation will depend, in part, on the demand for ethylene derivatives in the geographical areas served by our ethylene production facilities.

Significant Developments Affecting Industry Conditions and Our Business

COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the ongoing COVID-19 outbreak a pandemic and recommended containment and mitigation measures worldwide.

The pandemic has resulted in widespread adverse impacts on the global economy and on our employees, customers and suppliers.

The COVID-19 pandemic has not caused significant disruptions to our business operations and we do not expect the COVID-19 pandemic to cause significant disruptions to our future business operations, primarily due to the fact that 95% of our production is sold to Westlake on a take-or-pay contract.

OpCo's Petro 2 Turnaround

In September 2021, we commenced our planned major maintenance activities, or turnaround, of OpCo's Petro 2 ethylene unit in Lake Charles, Louisiana.

The turnaround was originally expected to conclude in November 2021.

On September 27, 2021, shortly after the turnaround commenced, there was a flash fire at the quench tower of the Petro 2 facility.

Several contractors working on the quench tower were injured.

Although there was no sustained fire or offsite impact resulting from the incident and the quench tower did not sustain significant damage, due to the subsequent investigation by the Occupational Safety and Health Administration, the duration of the turnaround was extended until December 2021.

There are lawsuits pending in connection with the flash fire at the quench tower during the Petro 2 turnaround.

We expect insurance to cover most of the costs associated with these lawsuits.

Force Majeure Events

OpCo declared force majeure events in September 2021 due to the flash fire at the Petro 2 facility, in June 2021 due to OpCo's Petro 1 facility outage, and in February 2021 due to the severe winter storm.

As a result of these force majeure events, the Partnership recognized revenue for buyer deficiency fees of $51.4 million and Shortfall of $58.9 million during 2021, which is classified as a component of net sales.

The buyer deficiency fee is measured periodically based upon the lower of the actual production deficiency at period end or the estimated annual production deficiency based upon OpCo's annual anticipated production.

These periodic estimates are updated at the end of the year based on actual annual production.

The buyer deficiency fee was collected from Westlake in January 2022 and the Shortfall recognized in 2021 is recoverable during 2022 under the Ethylene Sales Agreement.

While we believe we have substantially mitigated our indirect exposure to commodity price fluctuations during the term of the Ethylene Sales Agreement through the minimum purchase commitment and the cost-plus based pricing, our ability to execute our growth strategy in our areas of operation will depend, in part, on the demand for ethylene derivatives in the geographical areas served by our ethylene production facilities.

Recent Developments

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").

The OpCo Revolver Amendment, among other things, extended the maturity date of the OpCo Revolver to July 12, 2027 and provided for the replacement of the London Interbank Offered Rate ("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%.

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").

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 as the reference rate.

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

The table below and descriptions that follow represent the consolidated results of operations of the Partnership for the years 2021, 2020 and 2019.

The table below and descriptions that follow represent the consolidated results of operations of the Partnership for the years ended December 31, 2022, 2021 and 2020.

Year Ended December 31,

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Net sales—Westlake $ 1,342,910 $ 1,026,586 $ 888,245

Net co-products, ethylene and feedstock sales—third parties 188,272 78,425 154,246

Net co-products, ethylene and other sales—third parties 250,237 188,272 78,425

Total net sales 1,593,147 1,214,858 966,670

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(basic and diluted)

Common units—public 21,084,103 21,073,041 20,365,828

Common units—publicly and privately held 21,095,106 21,084,103 21,073,041

Common units—Westlake 14,122,230 14,122,230 14,122,230

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Year Ended December 31,

2021 2020 2019

Average industry prices (2)

Ethane (cents/lb) 10.4 6.4 7.3

Propane (cents/lb) 24.7 11.0 12.7

Ethylene (cents/lb) (3)

42.9 17.5 18.5

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

Fuel cost (Natural Gas) +67 % +86 %

Feedstock (Ethane) +56 % +63 %

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Reconciliations for each of MLP distributable cash flow and EBITDA are included below.

(2) Industry pricing data was obtained through IHS.

We have not independently verified the data.

(3) Represents average North American spot prices of ethylene over the period as reported by IHS.

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

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Net cash provided by operating activities $ 463,736 $ 408,439 $ 373,397

Loss from disposition of fixed assets (4,198) (1,000) (515)

Changes in operating assets and liabilities

and other (2,856) (31,278) (117,397)

Loss from disposition of property, plant and equipment (4,707) (4,198) (1,000)

Changes in operating assets and liabilities and other (124,200) (2,856) (31,278)

Net income 334,829 401,385 341,119

Depreciation, amortization and

disposition of property, plant and

Depreciation, amortization and disposition of property, plant and

125,781 113,032 104,154

Mark-to-market adjustment loss (gain) on

derivative contracts — (1,340) 1,301

Mark-to-market adjustment gain on derivative contracts — — (1,340)

Contribution to turnaround reserves (29,175) (80,090) (39,937)

Maintenance capital expenditures (45,249) (87,783) (37,343)

Incentive distribution rights — — —

Distributable cash flow attributable to

noncontrolling interest in OpCo (276,487) (294,670) (313,280)

Distributable cash flow attributable to noncontrolling interest in

OpCo (310,316) (276,487) (294,670)

MLP distributable cash flow $ 75,870 $ 70,057 $ 71,983

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Net cash provided by operating activities $ 463,736 $ 408,439 $ 373,397

Loss from disposition of fixed assets (4,198) (1,000) (515)

Changes in operating assets and liabilities

and other (2,856) (31,278) (117,397)

Loss from disposition of property, plant and equipment (4,707) (4,198) (1,000)

Changes in operating assets and liabilities and other (124,200) (2,856) (31,278)

Net income 334,829 401,385 341,119

Other income, net 1,566 62 733

Interest expense (8,816) (12,038) (19,623)

Interest expense—Westlake (13,407) (8,816) (12,038)

Provision for income taxes (1,017) (549) (564)

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For the year ended December 31, 2022, net income was $334.8 million on net sales of $1,593.1 million.

This represents an increase in net income of $60.3 million as compared to net income of $341.1 million on net sales of $966.7 million for the year ended December 31, 2020.

Net income attributable to the Partnership in 2021 was $82.5 million as compared to $66.2 million in 2020, an increase of $16.3 million.

This represents a decrease in net income of $66.6 million as compared to net income of $401.4 million on net sales of $1,214.9 million for the year ended December 31, 2021.

Net income attributable to the Partnership in 2022 was $64.2 million as compared to $82.5 million in 2021, a decrease of $18.3 million.

Income from operations was $347.7 million for 2022, as compared to $410.7 million for 2021.

The increase in income from operations, as well as net income and net income attributable to the Partnership, was primarily due to the higher sales price for ethylene sold to third parties and an increase in the buyer deficiency fee and Shortfall revenue in 2021 compared to 2020.

The buyer deficiency fee and Shortfall revenue in 2021 was $110.3 million as compared to $69.6 million in 2020.

These increases were slightly offset by lower sales volumes to Westlake due to OpCo's Petro 2 turnaround and force majeure events that resulted in lower production as well as higher feedstock and conversion costs.

Net sales for 2021 increased by $248.2 million as compared to 2020 mainly due to higher sales prices to third parties and Westlake per the terms of the Ethylene Sales Agreement and the buyer deficiency fee and Shortfall recognized, partially offset by lower sales volumes to Westlake during the year ended December 31, 2021.

The decrease in income from operations, as well as net income and net income attributable to the Partnership, was primarily due to increased ethane feedstock costs and natural gas prices, lower ethylene sales prices to third parties and a decrease in the buyer deficiency fee and Shortfall in 2022 as compared to 2021.

The buyer deficiency fee was $23.8 million in 2022 as co mpared to a buyer deficiency fee and Shortfall of $110.3 million in 2021 .

These decreases we re partially offs et by higher ethylene sales prices and volumes to Westlake pursuant to the terms of the Ethylene Sales Agreement and higher co-products sales prices and volumes in 2022.

The higher production in 2022 as compared to 2021 was due to OpCo's Petro 2 turnaround and the force majeure events in 2021.

Net sales for 2022 increased by $378.2 million as compared to 2021 mainly due to higher co-products sales prices and volumes and higher ethylene sales prices due to higher ethane feedstock costs and natural gas prices and volumes to Westlake pursuant to the terms of the Ethylene Sales Agreement, partially offset by lower ethylene sales prices to third parties and the smaller buyer deficiency fee recognized in 2022 as compared to the buyer deficiency fee and Shortfall recognized in 2021.

2022 Compared with 2021

Net sales increased by $378.2 million, or 31.1%, to $1,593.1 million in 2022 from $1,214.9 million in 2021.

The increase in net sales in 2021 was primarily due to the higher sales price to third parties and Westlake per the terms of the Ethylene Sales Agreement and the buyer deficiency fee and Shortfall of $110.3 million recognized in 2021 as compared to $69.6 million in 2020, partially offset by lower production during the year, mainly due to the force majeure events occurring in 2021 .

T he average sales price in 2021 contributed to a 26.8% increase in net sales, compared to 2020.

The lower sales volume during 2021 contributed to a decrease in net sales of 3.6% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease in sales volume during 2021 was primarily due to OpCo's Petro 2 Turnaround and the force majeure events in 2021.

The increase in net sales in 2022 was primarily due to higher co-products sales prices and volumes and higher ethylene sales prices due to higher ethane feedstock costs and natural gas prices and volumes to Westlake, partially offset by lower ethylene sales prices to third parties.

In addition, the buyer deficiency fee of $23.8 million recognized in 2022 was lower than the buyer deficiency fee and Shortfall of $110.3 million recognized in 2021.

T he higher average sales prices in 2022 contributed to a 20.3% increase in net sales compared to 2021.

The higher sales volumes during 2022 contributed to an increase in net sales of 21.8% for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in sales volume during 2022 was primarily due to higher production resulting in increased co-products sales volumes as well as higher ethylene sales volumes to Westlake.

Gross Profit .

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The gross profit margin was 23.7% in 2022 as compared to 36.4% in 2021.

The increase in gross profit was primarily due to the higher sales price for ethylene sold to third parties and an increase in the buyer deficiency fee and Shortfall revenue in 2021 compared to 2020.

The decreased 2021 gross profit margin was primarily due to increased feedstock and conversion costs as compared to 2020.

The decreased gross profit margin in 2022 was primarily due to increased ethane feedstock costs and natural gas prices, lower third party ethylene sales prices and the larger buyer deficiency fee and Shortfall recognized during 2021.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses increased by $5.1 million, or 19.7%, to $31.0 million in 2021 from $25.9 million in 2020.

The increase in 2021, as compared to 2020, was mainly attributable to higher service costs.

Interest Expense .

Interest expense decreased by $3.2 million to $8.8 million in 2021 from $12.0 million in 2020, largely due to a lower average interest rate on debt.

Selling, general and administrative expenses decreased by $1.3 million, or 4.2%, to $29.7 million in 2022 from $31.0 million in 2021.

The decrease in 2022, as compared to 2021, was mainly attributable to lower service costs.

Interest Expense—Westlake .

Interest expense increased by $4.6 million to $13.4 million in 2022 from $8.8 million in 2021, largely due to a higher interest rate on debt owed to Westlake.

Other Income, net.

Other income, net decreased by $0.6 million to $0.1 million in 2021 from $0.7 million in 2020, primarily due to a decrease in interest income earned under the Investment Management Agreement as a result of lower average interest rates.

Other income, net increased by $1.5 million to $1.6 million in 2022 from $0.1 million in 2021, primarily due to an increase in interest income earned under the Investment Management Agreement.

Provision for Income Taxes.

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MLP Distributable Cash Flow.

MLP distributable cash flow decreased by $1.9 million to $70.1 million in 2021 from $72.0 million in 2020.

The decrease in MLP distributable cash flow was primarily a result of lower production, increased turnaround reserves and higher maintenance expense in 2021 compared to 2020, partially offset by the buyer deficiency fee and Shortfall of $110.3 million recognized in 2021 as compared to $69.6 million in 2020 and lower interest expense during the year.

EBITDA increased by $62.7 million to $519.6 million in 2021 from 2020 EBITDA of $456.9 million.

The increased EBITDA, as compared to the prior year, was primarily due to the buyer deficiency fee and Shortfall of $110.3 million recognized during 2021 compared to the buyer deficiency of $69.6 million recognized in 2020 , partially offset by lower sales volumes as a result of lower production and higher feedstock and conversion costs.

MLP distributable cash flow increased by $5.8 million to $75.9 million in 2022 from $70.1 million in 2021.

The increase in MLP distributable cash flow was primarily a result of decreased turnaround reserves and maintenance capital expenditures, partially offset by lower earnings at OpCo.

EBITDA decreased by $49.3 million to $470.3 million in 2022 from EBITDA of $519.6 million in 2021.

The decreased EBITDA, as compared to the prior year, was primarily due to increased ethane feedstock costs and natural gas prices, lower ethylene sales prices to third parties, and a decrease in the buyer deficiency fee and Shortfall in 2022 compared to 2021, partially offset by higher ethylene sales to Westlake and higher co-products sales in 2022.

2021 Compared with 2020

Net sales decreased by $125.2 million, or 11.5%, to $966.7 million in 2020 from $1,091.9 million in 2019.

The decrease in net sales in 2020 was primarily due to lower production during the year, mainly due to the force majeure events and lower sales prices to third parties, partially offset by the buyer deficiency fee of $69.6 million recognized in 2020 and higher sales price to Westlake per the terms of the Ethylene Sales Agreement in 2020.

The lower sales volume during 2020 contributed to a decrease in net sales of 18.6% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease in sales volume during 2020 was primarily due to the force majeure events at our Lake Charles Petro 1 and Petro 2 units.

The average sales price in 2020 contributed to a 0.8% increase in net sales, compared to 2019, which was mainly due to higher sales prices to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower third party sales prices.

Net sales increased by $248.2 million, or 25.7%, to $1,214.9 million in 2021 from $966.7 million in 2020.

The increase in net sales in 2021 was primarily due to the higher sales price to third parties and Westlake pursuant to the terms of the Ethylene Sales Agreement and the buyer deficiency fee and Shortfall of $110.3 million recognized in 2021 as compared to $69.6 million in 2020, partially offset by lower production during the year, mainly due to the force majeure events occurring in 2021 .

T he average sales prices in 2021 contributed to a 26.8% increase in net sales, compared to 2020.

The lower sales volumes during 2021 contributed to a decrease in net sales of 3.6% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease in sales volume during 2021 was primarily due to OpCo's Petro 2 turnaround and the force majeure events in 2021.

Gross Profit .

1 unchanged sentence

The gross profit margin was 36.4% in 2021 as compared to 39.2% in 2020.

The increased 2020 gross profit margin was due to higher earnings on ethylene sold to Westlake and the buyer deficiency fee of $69.6 million recognized during the year, partially offset by lower sales volumes resulting from lower production at the Lake Charles Petro I and Petro 2 units compared to 2019.

The increase in gross profit was primarily due to the higher sales price for ethylene sold to third parties and an increase in the buyer deficiency fee and Shortfall revenue in 2021 compared to 2020.

The decreased 2021 gross profit margin was primarily due to increased feedstock and conversion costs as compared to 2020.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses decreased by $3.4 million, or 11.6%, to $25.9 million in 2020 from $29.3 million in 2019.

The decrease in 2020, as compared to 2019, was mainly attributable to lower service cost.

Interest Expense .

Interest expense decreased by $7.6 million to $12.0 million in 2020 from $19.6 million in 2019, largely due to a lower interest rate on debt as a result of a decrease in the London Interbank Offered Rate ("LIBOR").

Selling, general and administrative expenses increased by $5.1 million, or 19.7%, to $31.0 million in 2021 from $25.9 million in 2020.

The increase in 2021, as compared to 2020, was mainly attributable to higher service costs.

Interest Expense—Westlake .

Interest expense decreased by $3.2 million to $8.8 million in 2021 from $12.0 million in 2020, largely due to a lower average interest rate on debt owed to Westlake.

Other Income, net.

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MLP distributable cash flow decreased by $1.9 million to $70.1 million in 2021 from $72.0 million in 2020.

The decrease in MLP distributable cash flow was primarily a result of lower production, increased turnaround reserves and higher maintenance expense, partially offset by the buyer deficiency of $69.6 million recognized in 2020 and lower interest expense during the year.

EBITDA decreased by $3.7 million to $456.9 million in 2020 from 2019 EBITDA of $460.6 million.

The decreased EBITDA, as compared to the prior year, was primarily due to lower sales volumes as a result of lower production and higher maintenance expense, partially offset by the buyer deficiency fee of $69.6 million recognized during 2020 and lower selling, general and administrative expenses.

EBITDA increased by $62.7 million to $519.6 million in 2021 from 2020 EBITDA of $456.9 million.

Operating Activities

Operating activities provided cash of $463.7 million in 2022 as compared to cash provided by operating activities of $408.4 million in 2021.

The $55.3 million increase in cash flows from operating activities was mainly due to OpCo's Petro 2 facility turnaround activities in 2021, partially offset by a decrease in net income and in cash provided by working capital.

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 $9.5 million in 2022 as compared to $25.6 million of cash provided in 2021, resulting in an unfavorable change of $16.1 million.

This change in 2022 as compared to 2021 was primarily due to decreases in accounts payable—third parties and accrued and other liabilities due to the 2022 payment of 2021 accruals related to the Petro 2 turnaround activities that occurred in 2021, as well as increases in accounts receivable—third parties due to higher sales in 2022 resulting from the Petro 2 turnaround in the second half of 2021.

These unfavorable changes were partially offset by a favorable change in net accounts receivable—Westlake due to the collections of the 2021 buyer deficiency fee and a significant portion of the 2021 Shortfall during 2022.

Operating activities provided cash of $408.4 million in 2021 as compared to cash provided by operating activities of $373.4 million in 2020.

The $35.0 million increase in cash flows from operating activities was mainly due to increase in net income and in cash provided by working capital, partially offset by OpCo's Petro 2 facility turnaround activities during 2021 as compared to 2020.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable and accrued liabilities and other liabilities, provided cash of $25.6 million in 2021 as compared to $67.9 million of cash used in 2020, resulting in an overall favorable change of $93.5 million.

This change in 2021 as compared to 2020 was due to changes in receivable due from Westlake resulting from the buyer deficiency fee and Shortfall recognized in 2021 as compared to 2020 and favorable changes in third party accounts payable and accrued liabilities due to the timing of payments related to the turnaround costs and capital expenditures.

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 $25.6 million in 2021 as compared to $67.9 million of cash used in 2020, resulting in an overall favorable change of $93.5 million.

This change in 2021 as compared to 2020 was due to changes in receivable due from Westlake resulting from the buyer deficiency fee and Shortfall recognized in 2021 as compared to 2020 and favorable changes in third party accounts payable and accrued and other liabilities due to the timing of payments related to the turnaround costs and capital expenditures.

These favorable changes were partially offset by an unfavorable change related to turnaround costs incurred during 2021.

Operating activities provided cash of $373.4 million in 2020 as compared to cash provided by operating activities of $450.8 million in 2019.

The $77.4 million decrease in cash flows from operating activities was mainly due to an increase in use of cash in working capital during 2020 as compared to 2019.

Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable and accrued liabilities and other liabilities, used cash of $67.9 million in 2020 as compared to $11.7 million of cash provided in 2019, resulting in an overall unfavorable change of $79.6 million.

This change was due to an unfavorable change in Westlake accounts receivable in 2020 as compared to 2019, primarily due to the buyer deficiency fee recognized in 2020.

Investing Activities

Net cash used in investing activities during 2021 was $64.3 million as compared to net cash provided by investing activities of $2.0 million in 2020, mainly due to increased additions to property, plant, and equipment, partially offset by maturities of investments under the Investment Management Agreement in 2021, as compared to 2020.

Net cash used for investing activities during 2022 was $12.0 million as compared to net cash used for investing activities of $64.3 million in 2021.

The $52.3 million decrease in cash used for investing activities was mainly due to maturities of investments under the Investment Management Agreement in 2022 as compared to 2021.

During 2022, we invested $319.9 million with Westlake, and $362.0 million of such investments matured.

Capital expenditures were $54.1 million in 2022 as compared to $81.2 million in 2021.

The higher capital expenditure in 2021 was primarily associated with OpCo's Petro 2 turnaround.

Capital expenditures in 2022 were lower than in 2021 primarily due to OpCo's Petro 2 turnaround in 2021.

Remaining capital expenditures during 2022 and 2021 were related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Net cash provided by investing activities during 2020 was $2.0 million as compared to net cash used for investing activities of $57.7 million in 2019, mainly due to maturities of investments under the Investment Management Agreement and a decrease in additions to property, plant and equipment in 2020, as compared to 2019.

Net cash used for investing activities during 2021 was $64.3 million as compared to net cash provided by investing activities of $2.0 million in 2020, mainly due to increased additions to property, plant, and equipment, partially offset by maturities of investments under the Investment Management Agreement in 2021, as compared to 2020.

During 2021, we invested $276.0 million with Westlake, and $293.0 million of such investments matured.

Capital expenditures were $81.2 million in 2021 as compared to $37.0 million in 2020.

Capital expenditures during 2020 and 2019 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

The higher capital expenditure in 2021 was primarily associated with OpCo's Petro 2 turnaround.

Remaining capital expenditures during 2021 and 2020 were related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.

Financing Activities

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The cash outflows during 2021 were related to distributions of $277.9 million to Westlake and of $66.4 million to other unitholders by the Partnership.

The cash outflows during 2020 were related to distributions of $311.8 million to Westlake and of $66.4 million to other unitholders by the Partnership.

Liquidity and Capital Resources

Liquidity and Financing Arrangements

On March 29, 2019, we completed the private placement of 2,940,818 common units at a price of $21.40 per unit.

Net proceeds from the issuance of these common units were approximately $62.7 million.

Pursuant to the terms of the ATM Agreement, entered in October 2018 and amended in February 2020, among the Partnership and various investment banks, the Partnership may offer and sell the Partnership's common units from time to time to or through the Managers, as the Partnership's sales agents or as principals, having an aggregate offering amount of up to $50.0 million (the "ATM Program").

Pursuant to the terms of the Equity Distribution Agreement, entered in October 2018 and amended in February 2020, among the Partnership and various investment banks, the Partnership may offer and sell the Partnership's common units from time to time to or through the investment banks, as the Partnership's sales agents or as principals, having an aggregate offering amount of up to $50.0 million (the "ATM Program").

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.

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

We, OpCo and Westlake are parties to an Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months.

We, OpCo and Westlake are parties to an Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months.

Per the terms of the Investment Management Agreement, cash invested with Westlake 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.

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No such funding was required by OpCo during 2022, 2021 or 2020.

Total capital expenditures for the years ended December 31, 2022, 2021 and 2020 were $54.1 million, $81.2 million, and $37.0 million, respectively.

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.

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

As described above, we, OpCo and Westlake are parties to an Investment Management Agreement that authorizes Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months.

The Partnership had $65.0 million of cash invested under the Investment Management Agreement at December 31, 2022.

OpCo Revolver

In connection with the IPO, OpCo entered into a $600.0 million revolving credit facility with Westlake, as amended in August and December 2017 and March 2020 (the "OpCo Revolver") that may be used to fund growth projects and working capital needs.

On April 30, 2019, OpCo repaid $201.4 million of borrowings under the OpCo Revolver.

As of December 31, 2021, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at the London Interbank Offered Rate ("LIBOR") rate plus 2.0%, which is accrued in arrears quarterly.

On September 25, 2018, the OpCo Revolver was amended to extend the scheduled maturity date from August 4, 2019 to September 25, 2023 and to revise the applicable margin from 3% to 2%.

In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake (the "MLP Revolver").

The MLP Revolver has a borrowing capacity of $600.0 million.

On March 29, 2019, the Partnership borrowed $123.5 million under the MLP Revolver to partially fund the purchase of an additional 4.5% interest in OpCo.

On March 19, 2020, the Partnership entered into an amendment to the MLP Revolver, to extend the maturity date to March 19, 2023 and add a phase-out provision for LIBOR, which is to be replaced by an alternate benchmark rate.

Borrowings under the MLP Revolver bear interest at a variable rate of either (a) LIBOR plus 2.0% or, if LIBOR is no longer available, (b) Alternate Base Rate plus 1.0%.

In connection with the IPO, OpCo entered into a $600.0 million revolving credit facility with an affiliate of Westlake, as amended in June 2017, September 2018 and July 2022 (the "OpCo Revolver") that may be used to fund growth projects and working capital needs.

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

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 the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR").

The Applicable Margin under the OpCo Revolver is 1.75%.

As of December 31, 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.

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 the SOFR as the reference rate.

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

The MLP Revolver provides that we may pay all or a portion of the interest on any borrowings in kind, in which case any such amounts would be added to the principal amount of the loan.

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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 December 31, 2021, the outstanding borrowings under the MLP Revolver totaled $377.1 million.

As of December 31, 2022, the 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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Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Our more critical accounting estimates include those related to long-lived assets, fair value estimates, goodwill impairment and environmental and legal obligations.

Our more critical accounting estimates include those related to long-lived assets, intangible assets, fair value estimates, goodwill impairment and environmental and legal obligations.

Inherent in such estimates are certain key assumptions.

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The fair value of the financial instruments is estimated using quoted market prices in active markets and observable market-based inputs or unobservable inputs that are corroborated by market data when active markets are not available or unobservable inputs that are not corroborated by market data.

We settled all derivatives in 2020 and no new derivatives were entered in 2021, however, we may enter into derivative arrangements in the future.

We settled all derivatives in 2020 and did not enter into any new derivative arrangements during 2021 or 2022;

however, we may enter into derivative arrangements in the future.

Goodwill impairment.

Goodwill is evaluated for impairment, or when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually.

Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually.

At December 31, 2022, recorded goodwill was $5.8 million, all of which was associated with the acquisition of the Longview Pipeline as part of the past acquisition of Westlake's Longview production facilities.

We perform our annual impairment assessment in October.

We perform our annual impairment assessment in the fourth quarter.

We may elect to perform an optional qualitative assessment to determine whether a quantitative impairment analysis is required.

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Settlement of these conditional asset retirement obligations is not expected to have a material adverse effect on the Partnership's financial condition, results of operations or cash flows in any individual reporting period.

Recent Accounting Pronouncements

See Note 1 to the consolidated financial statements included within this report for a full description of recent accounting pronouncements, including expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.

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 7. Management’s Discussion and Analysis