Westlake Chemical Partners LP 10-Q

Item 1. Financial Statements WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2023 December 31, 2022 (in thousands of dollars, except unit amounts) ASSETS Current assets Cash and cash equivalents $ 59,434 $ 64,782 Receivable under the Investment Management Agreement—Westlake Corporation ("Westlake") 94,230 64,996 Accounts receivable, net—Westlake 45,467 90,965 Accounts receivable, net—third parties 17,443 20,030 Inventories 3,260 4,715 Prepaid expenses and other current assets 718 305 Total current assets 220,552 245,793 Property, plant and equipment, net 963,490 990,213 Goodwill 5,814 5,814 Deferred charges and other assets, net 145,731 130,159 Total assets $ 1,335,587 $ 1,371,979 LIABILITIES Current liabilities Accounts payable—Westlake $ 10,606 $ 34,087 Accounts payable—third parties 28,759 15,317 Accrued and other liabilities 26,952 17,537 Total current liabilities 66,317 66,941 Long-term debt payable to Westlake 399,674 399,674 Deferred income taxes 1,638 1,656 Total liabilities 467,629 468,271 Commitments and contingencies (Note 12) EQUITY Common unitholders—publicly and privately held ( 21,099,638 and 21,099,638 units issued and outstanding at June 30, 2023 and December 31, 2022, respectively) 476,791 480,643 Common unitholder—Westlake ( 14,122,230 and 14,122,230 units issued and outstanding at June 30, 2023 and December 31, 2022, respectively) 51,282 53,859 General partner—Westlake ( 242,572 ) ( 242,572 ) Total Westlake Chemical Partners LP partners' capital 285,501 291,930 Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo") 582,457 611,778 Total equity 867,958 903,708 Total liabilities and equity $ 1,335,587 $ 1,371,979 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 (in thousands of dollars, except unit amounts and per unit data) Revenue Net sales—Westlake $ 224,575 $ 365,112 $ 482,046 $ 655,769 Net co-products, ethylene and other sales—third parties 39,602 83,673 89,808 155,416 Total net sales 264,177 448,785 571,854 811,185 Cost of sales 176,455 351,483 378,059 622,444 Gross profit 87,722 97,302 193,795 188,741 Selling, general and administrative expenses 7,229 9,919 15,143 18,146 Income from operations 80,493 87,383 178,652 170,595 Other income (expense) Interest expense—Westlake ( 6,117 ) ( 2,859 ) ( 13,432 ) ( 5,058 ) Other income, net 1,061 90 1,881 65 Income before income taxes 75,437 84,614 167,101 165,602 Provision for income taxes 173 175 385 338 Net income 75,264 84,439 166,716 165,264 Less: Net income attributable to noncontrolling interest in OpCo 63,378 68,001 139,938 132,632 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 11,886 $ 16,438 $ 26,778 $ 32,632 Net income per limited partner unit attributable to Westlake Chemical Partners LP (basic and diluted) Common units $ 0.34 $ 0.47 $ 0.76 $ 0.93 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,099,638 21,086,988 21,099,638 21,089,573 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 — Publicly and Privately Held Common Unitholder — Westlake General Partner — Westlake Noncontrolling Interest in OpCo Total (in thousands of dollars) Balances at December 31, 2022 $ 480,643 $ 53,859 $ ( 242,572 ) $ 611,778 $ 903,708 Net income 8,921 5,971 — 76,560 91,452 Quarterly distribution to unitholders ( 9,947 ) ( 6,657 ) — — ( 16,604 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 88,678 ) ( 88,678 ) Balances at March 31, 2023 $ 479,617 $ 53,173 $ ( 242,572 ) $ 599,660 $ 889,878 Net income 7,120 4,766 — 63,378 75,264 Quarterly distribution to unitholders ( 9,946 ) ( 6,657 ) — — ( 16,603 ) Quarterly distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 80,581 ) ( 80,581 ) Balances at June 30, 2023 $ 476,791 $ 51,282 $ ( 242,572 ) $ 582,457 $ 867,958 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— Publicly and Privately Held Common Unitholder— Westlake General Partner— Westlake Noncontrolling Interest in OpCo Total (in thousands of dollars) Balances 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 ) Balances 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 ) Balances at June 30, 2022 $ 481,453 $ 54,526 $ ( 242,572 ) $ 675,534 $ 968,941 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) Six Months Ended June 30, 2023 2022 (in thousands of dollars) Cash flows from operating activities Net income $ 166,716 $ 165,264 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 53,676 62,291 Loss from disposition of property, plant and equipment 422 3,430 Other losses, net 303 3,371 Changes in operating assets and liabilities Accounts receivable—third parties 2,266 ( 39,027 ) Net accounts receivable—Westlake 21,481 82,798 Inventories 1,455 1,450 Prepaid expenses and other current assets ( 413 ) 329 Accounts payable—third parties 15,372 ( 12,485 ) Accrued and other liabilities 9,489 ( 39,159 ) Other, net ( 27,364 ) ( 2,595 ) Net cash provided by operating activities 243,403 225,667 Cash flows from investing activities Additions to property, plant and equipment ( 17,169 ) ( 32,334 ) Investments with Westlake under the Investment Management Agreement ( 164,116 ) ( 170,000 ) Maturities of investments with Westlake under the Investment Management Agreement 135,000 147,000 Net cash used for investing activities ( 46,285 ) ( 55,334 ) Cash flows from financing activities Proceeds from debt payable to Westlake 98,500 — Repayment of debt payable to Westlake ( 98,500 ) — Quarterly distributions to noncontrolling interest retained in OpCo by Westlake ( 169,259 ) ( 135,818 ) Quarterly distributions to unitholders ( 33,207 ) ( 33,203 ) Net cash used for financing activities ( 202,466 ) ( 169,021 ) Net increase (decrease) in cash and cash equivalents ( 5,348 ) 1,312 Cash and cash equivalents at beginning of period 64,782 17,057 Cash and cash equivalents at end of period $ 59,434 $ 18,369 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, 2022 (the "2022 Form 10-K"), filed with the SEC on March 1, 2023. 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, 2022. References to "Westlake" refer collectively to Westlake 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 June 30, 2023, its results of operations for the three and six months ended June 30, 2023 and 2022 and the changes in its cash position for the six months ended June 30, 2023 and 2022. 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, 2023 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: June 30, 2023 December 31, 2022 Trade customers $ 15,232 $ 18,813 Allowance for credit losses ( 601 ) ( 280 ) Other receivables 2,812 1,497 Accounts receivable, net—third parties $ 17,443 $ 20,030 3. Inventories Inventories consist of the following: June 30, 2023 December 31, 2022 Finished products $ 2,616 $ 4,093 Feedstock, additives and chemicals 644 622 Inventories $ 3,260 $ 4,715 4. Property, Plant and Equipment Depreciation expense on property, plant and equipment of $ 20,928 and $ 23,888 is included in cost of sales in the consolidated statements of operations for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense on property, plant and equipment of $ 41,885 and $ 47,884 is included in cost of sales in the consolidated statements of operations for the six months ended June 30, 2023 and 2022, respectively. 5. Deferred Charges and Other Assets Amortization expense on deferred charges and other assets of $ 6,112 and $ 7,121 is included in cost of sales in the consolidated statements of operations for the three months ended June 30, 2023 and 2022, respectively . Amortization expense on deferred charges and other assets of $ 11,791 and $ 14,407 is included in cost of sales in the consolidated statements of operations for the six months ended June 30, 2023 and 2022, respectively. 6. Distributions and Net Income Per Limited Partner Unit On August 1, 2023, 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 June 30, 2023 of $ 0.4714 per unit. This distribution is payable on August 25, 2023 to unitholders of record as of August 11, 2023. 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income attributable to the Partnership $ 11,886 $ 16,438 $ 26,778 $ 32,632 Less: Limited partners' distribution declared on common units 16,604 16,595 33,207 33,195 Distribution in excess of net income $ ( 4,718 ) $ ( 157 ) $ ( 6,429 ) $ ( 563 ) 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 June 30, 2023 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 ( 4,718 ) — ( 4,718 ) Net income $ 11,886 $ — $ 11,886 Weighted average units outstanding: Basic and diluted 35,221,868 35,221,868 Net income per limited partner unit: Basic and diluted $ 0.34 Three Months Ended June 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,595 $ — $ 16,595 Distribution in excess of net income ( 157 ) — ( 157 ) Net income $ 16,438 $ — $ 16,438 Weighted average units outstanding: Basic and diluted 35,209,218 35,209,218 Net income per limited partner unit: Basic and diluted $ 0.47 Six Months Ended June 30, 2023 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 33,207 $ — $ 33,207 Distribution in excess of net income ( 6,429 ) — ( 6,429 ) Net income $ 26,778 $ — $ 26,778 Weighted average units outstanding: Basic and diluted 35,221,868 35,221,868 Net income per limited partner unit: Basic and diluted $ 0.76 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) Six Months Ended June 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 33,195 $ — $ 33,195 Distribution in excess of net income ( 563 ) — ( 563 ) Net income $ 32,632 $ — $ 32,632 Weighted average units outstanding: Basic and diluted 35,211,803 35,211,803 Net income per limited partner unit: Basic and diluted $ 0.93 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 June 30, 2023 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. Distributions Per Common Unit Distributions per common unit for the three and six months ended June 30, 2023 and 2022 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Distributions per common unit $ 0.4714 $ 0.4714 $ 0.9428 $ 0.9428 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 and subsequent renewals thereof for utilization under this agreement. No common units were issued under this program as of June 30, 2023. 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net sales—Westlake $ 224,575 $ 365,112 $ 482,046 $ 655,769 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Feedstock purchased from Westlake and included in cost of sales $ 80,727 $ 239,920 $ 183,769 $ 402,199 Other charges from Westlake and included in cost of sales 29,729 46,963 60,635 86,430 Total $ 110,456 $ 286,883 $ 244,404 $ 488,629 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Services received from Westlake and included in selling, general and administrative expenses $ 6,625 $ 6,864 $ 13,296 $ 13,430 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Goods and services purchased from Westlake and capitalized as assets $ 1,173 $ 623 $ 1,872 $ 1,373 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) 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 durations 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 $ 1,058 and $ 940 was included in the receivable under the Investment Management Agreement balance at June 30, 2023 and December 31, 2022, respectively. Total interest earned related to the Investment Management Agreement was $ 1,058 and $ 191 for the three months ended June 30, 2023 and 2022, respectively, and $ 1,965 and $ 243 for the six months ended June 30, 2023 and 2022, respectively. The Partnership's receivable under the Investment Management Agreement was as follows: June 30, 2023 December 31, 2022 Receivable under the Investment Management Agreement $ 94,230 $ 64,996 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. Based on OpCo's 2022 production, the Partnership recognized buyer deficiency fees of $ 23,835 during 2022. The buyer deficiency fee was received by the Partnership in January 2023. Additionally, as a result of force majeure events in 2021, the Partnership recognized a shortfall fee of $ 58,906 during 2021, of which $ 7,193 remained to be collected by the Partnership as of December 31, 2022. Of this amount, $ 5,890 was received in the six months ended June 30, 2023 and the remaining amount will be collected during the remainder of 2023 pursuant to the terms of the Ethylene Sales Agreement. The Partnership's accounts receivable from Westlake were as follows: June 30, 2023 December 31, 2022 Accounts receivable—Westlake $ 45,467 $ 90,965 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: June 30, 2023 December 31, 2022 Accounts payable—Westlake $ 10,606 $ 34,087 Related Party Leases OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail cars and land. Operating lease rentals paid to Westlake for such leases were $ 310 and $ 574 for the three months ended June 30, 2023 and 2022, respectively, an d $ 1,047 and $ 1,260 for the six months ended June 30, 2023 and 2022, respectively, and are 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. 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) Debt Payable to Related Parties See Note 9 for a description of related party debt payable balances. Interest on related party debt payable balances, net of capitalized interest, for the three months ended June 30, 2023 and 2022 was $ 6,117 and $ 2,859 , respecti vely. Interest on related party debt payable balances, net of capitalized interest, for the six months ended June 30, 2023 and 2022 was $ 13,432 and $ 5,058 , respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At June 30, 2023 and December 31, 2022, accrued interest on related party debt was $ 6,156 and $ 4,733 , 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: June 30, 2023 December 31, 2022 Long-term debt payable to Westlake $ 399,674 $ 399,674 Major Customer and Concentration of Credit Risk During the three months ended June 30, 2023 and 2022, Westlake accounted for approximately 85.0 % and 81.4 %, respectively, of the Partnership's net sale s. During the six months ended June 30, 2023 and 2022, Westlake accounted for approximately 84.3 % and 80.8 %, respectively, of the Partnership's net sales. 9. Long-Term Debt Payable to Westlake Long-term debt payable to Westlake consists of the following: June 30, 2023 December 31, 2022 OpCo Revolver $ 22,619 $ 22,619 MLP Revolver 377,055 377,055 Long-term debt payable to Westlake $ 399,674 $ 399,674 As of June 30, 2023, outstanding borrowings under the OpCo Revolver and the MLP Revolver bore interest at the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10 % credit spread adjustment. The Applicable Margin under the OpCo Revolver is 1.75 %. The Applicable Margin under the MLP Revolver varies between 1.75 % and 2.75 %, depending on the Partnership's Consolidated Leverage Ratio. The OpCo Revolver and the MLP Revolver are scheduled to mature on July 12, 2027. The weighted average interest rate on all long-term debt was 6.7 % and 4.8 % at June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, 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. 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) 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 long-term 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 long-term debt at June 30, 2023 and December 31, 2022 are summarized in the table below. The fair value of long-term 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 long-term debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of the Partnership's long-term debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of the Partnership's long-term debt include the selection of an appropriate discount rate. June 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Long-term debt payable to Westlake $ 399,674 $ 406,687 $ 399,674 $ 405,879 11. Supplemental Information Accrued and Other Liabilities Accrued and other liabilities were $ 26,952 and $ 17,537 at June 30, 2023 and December 31, 2022, respectively. Accrued maintenance expense, accrued turnaround costs, accrued interest on related party debt and accrued taxes, which are components of accrued and other liabilities, were $ 3,780 , $ 6,748 , $ 6,156 and $ 4,423 , respectively, at June 30, 2023 and $ 3,752 , $ 674 , $ 4,733 and $ 2,652 , respectively, at December 31, 2022. No other component of accrued and other liabilities was more than five percent of total current liabilities. Cash Flow Information Non-cash Investing Activity Capital expenditure related liabilities, included in accounts payable—third parties and accrued and other liabilities, were $ 4,368 and $ 6,557 at June 30, 2023 and 2022, respectively. Interest Paid Interest paid by the Partnership, net of interest capitalized, was $ 11,987 and $ 4,237 for the six months ended June 30, 2023 and 2022, 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, 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. Pursuant to the Omnibus Agreement, certain subsidiaries of 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. The Partnership expects 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. 13 Table of Contents